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Year One of the RTFO 

Renewable Fuels Agency report on the 
Renewable Transport Fuel Obligation 

2008/09 






Renewable Fuels Agency 
2008/09 Annual Report to 
Parliament on the Renewable 
Transport Fuel Obligation 



Presented to Parliament pursuant to The Renewable Transport Fuel 
Obligations Order 2007 (SI 2007 no 3072). 



London : The Stationery Office £19.15 



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Contents 



Section 1 - Introduction 



3 


Foreword 


4 


Executive Summary 


8 


Introduction 


11 


Performance of the RFA 


14 


Acronyms and abbreviations 


Section 2 - RTFO 2008/09 


16 


Year of RTFO results 


18 


Supplier compliance with the RTFO 


20 


Supplier performance 


26 


Supplier sustainability work 


30 


The verification process 


34 


Effectiveness of carbon and sustainability reporting 



Section 3 - Effects of the RTFO and the fuels supplied 

37 Effects of the RTFO on greenhouse gas emissions 

45 Effects of the RTFO in the UK 

50 International effects of the RTFO 

Section 4 - Towards sustainable biofuels 

57 'Gallagher' 18 months on 

59 Indirect effects of using wastes, residues and by-products 

62 Avoiding indirect land-use change 

65 Development of sustainability standards 

Section 5 - Concluding remarks 

69 Concluding remarks 








The oildrop images on the section divider pages represent the five main biofuel feedstocks reported in the UK during the first year of the RTFO, ordered by 
volume in litres: soy - 438m, oilseed rape - 324m, sugar cane - 180m, palm - 127m, tallow - 115m. 



Designed & produced by Renewable Fuels Agency 

Printed by Halcyon Print Management on revive Pure White Uncoated 

a recycled grade containing 100% post consumer waste. 



Year One of the RTFO 



Renewable Fuels Agency 1 



Section 1 

Introduction 




2 Renewable Fuels Agency 



Year One of the RTFO 



Foreword 



This report by the 
Renewable Fuels Agency 
completes the reporting 
cycle of the first year of 
the Renewable Transport 
Fuel Obligation. Since our 
first monthly report was 
published in July 2008, we 
have provided increasingly 
detailed information about 
the biofuels supplied for the 
UK market. Until now this 
information was provisional, 
and, although checked 
by us, was published as 
reported by the suppliers. 



This is the first time anywhere in the world that collated and 
verified information about the quantity of biofuels supplied, 
their direct effects and their sustainability has been published. 
Over 94% of the reported data we are presenting in this 
report has been independently verified. 

In addition to the data about direct effects, this report 
also looks more broadly at the impact, both in the UK and 
internationally, of biofuels used for road transport. 




The UK is now preparing for the introduction of mandatory 
sustainability standards under the Renewable Energy 
Directive and we expect to be asked to implement these 
new rules. In doing so, we will continue to operate with a 
commitment to openness, transparency and full consultation 
with our stakeholders, providing information, analysis and 
data to help Government formulate biofuels policy and for 
consumers to make informed fuel purchasing decisions. 

Finally, I would like to thank our staff for their hard and 
productive work and for the positive way they are facing the 
challenges ahead. 




Professor Ed Gallagher 

Chair 

4 January 2010 



In February 2008 I was asked by the Secretary of State for 
Transport to review the indirect impacts of biofuels. In July 
of that year, we published the Gallagher Review, which 
concluded that these effects could not be ignored and had 
impacts on both food prices and the greenhouse gas savings 
claimed for biofuels. 

We called for further research to map out more clearly how 
truly sustainable biofuels could be produced. This included the 
use of idle land to grow biofuels, the use of new technologies 
and biofuels from appropriate wastes and residues. 

The European Commission must now report on indirect 
land-use change by December 2010. Our report describes 
a methodology for identifying agricultural systems in which 
indirect land-use change can be avoided and sets out five 
cases in which we believe this can be achieved. Incentivising 
the adoption of such systems would, in our opinion, represent 
a valuable addition to any future regulatory system. 



Year One of the RTFO 



Renewable Fuels Agency 3 



Executive Summary 



Supply of biofuel 

In 2008/09, the first year of operation, the Renewable 
Transport Fuel Obligation (RTFO) met its objective of driving 
a market for biofuels in the UK. 2.7% of the UK's total road 
transport fuel supply was biofuel, which was slightly over the 
Government's target of 2.5% and more than twice the supply 
of biofuel in 2007/08. 

All of the suppliers obligated under the RTFO met their 
Obligations in full by redeeming Renewable Transport 
Fuel Certificates. None of the obligated suppliers paid to 
'buy-out' 1 of their obligations. Fuel was supplied from at least 
1 8 countries, and at least 1 2 different feedstocks. 





Government target Performance 
for 2008/09 2008/09 


Percentage of feedstock 
meeting a Qualifying 
Environmental Standard 


30% 


20% 


Annual GHG saving of 
fuel supplied 


40% 


46% 


Data reporting of 
renewable fuel 
characteristics 


50% 


64% 



Table 1.1: Government targets vs. performance 



Of the carbon and sustainability data reported to the RFA, 
94.3% was verified, 0.3% came from small suppliers and 
was not subject to verification, and the remaining 5.4% did 
not receive the limited assurance verification required. 

Supplier environmental performance 

The environmental sustainability of the RTFO overall is 
dependent upon the performance of suppliers in sourcing 
sustainable fuels. Here, the results are polarised, with a 
very wide range. On the one hand, a number of suppliers 
performed well, including ConocoPhillips, Greenergy and 
Mabanaft, who met all three of the Government's targets 
with fully verified datasets. The success of these companies 
demonstrates that the RTFO reporting system has been 



1 The RTFO includes a mechanism that allows suppliers to 'buy-out' all 
or part of their obligation rather than redeem certificates. Set at 1 5p per litre 
for 2008/09, the buy-out mechanism is intended to ensure the supply of 
biofuels in normal market conditions and act as a safety valve in the case 
that feedstock prices rise too high. 



effective in several cases, and that it is possible to integrate 
sustainability into procurement policies. 

It also highlights those at the other end of the scale, where 
a number performed poorly, including Morgan Stanley and 
Topaz who failed to meet any of the targets, and Chevron and 
Total who met only one. BP reported meeting two targets, 
and Murco reported meeting one, but their verifiers were 
unable to provide the limited level of assurance required for 
their data to be acceptable. Significant improvement will be 
required by all suppliers to meet the challenges of mandatory 
sustainability requirements under the EU's forthcoming 
Renewable Energy Directive (RED). 



Number of targets 
met 



No limited 

assurance. 

Targets 

claimed: 



Fossil fuel company 

ConocoPhillips 
Greenergy 

Lissan a 

Mabanaft 

Esso 

Harvest 

Petroplus 

Shell 

Chevron 

Total 

Morgan Stanley 

Prax 

BP b 

Murco 



Topaz 



a Lissan, as a low volume supplier of biofuels, were not required to 
verify their data. 

b BP submitted a revised Annual Report after the deadline in which 
some of their data was verified. 

Table 1.2: Number of targets met by each fossil fuel 
company 



4 Renewable Fuels Agency 



Year One of the RTFO 



2.7°/c 



of the UK's total road transport fuel supply was biofuel 



Carbon emissions 
Lifecycle savings, direct effects 

Based on the RFA's lifecycle analysis methodology the 
fuels supplied under the RTFO in 2008/09 delivered a 46% 
carPon saving compared to the equivalent fossil fuels, a 
reduction in carPon emissions of 1 .6 million tonnes of C0 2 e. 
This is in excess of the Government's target of 40% savings 
and consistent with the Government's Regulatory Impact 
Assessment (2007). From 2010, the RED will require the use 
of a different lifecycle methodology. An analysis using the 
default emissions factors contained in the RED suggests that 
we would have reported a similar overall carPon saving. 

In 2008/09, 42% of previous land-use was reported as 
'unknown', this was due to a lack of verifiaPle evidence 
gathered from supply chains. Emissions from any unknown 
land-use change are not taken into account in the carPon 
savings figure aPove and it is possiPle that some fraction of 
the unknown land-use change may have caused a significant 
release of stored carPon. Under the RED, suppliers will have 
to demonstrate that their feedstocks were not sourced from 
carPon rich land. 

There are examples of good practice where tracking actual 
carPon emissions data has allowed suppliers to report 
suPstantially Petter than default emissions savings, e.g. for 
UK sugar Peet. More generally, in the long term, suPstantial 
reductions in emissions from biofuels should be achievable. 
For instance, it should be possible to reduce soil emissions 
of nitrous oxide with improved understanding of optimum 
fertiliser application rates. Specific activities such as methane 
collection for palm oil mill effluent also offer large potential 
savings. 

Indirect effects 

The indirect effects of biofuels are currently unaccounted 
for in the RTFO carbon methodology. The Gallagher Review 
found that greenhouse gas emissions from indirect land-use 
change driven by the use of biofuels could be very large. If 
left unchecked, these could potentially cause an increase in 
overall carbon emissions rather than a reduction. However, 
it is extremely challenging to assess the impacts accurately 
and precisely. 

The RFA's programme of work since the Gallagher Review 
has included developing a practical methodology to define 
conditions in which biofuel feedstock cultivation projects can 



demonstrably avoid unwanted indirect effects. The report 
describes 'real life' case studies, including the cultivation of 
palm oil onto low value Imperata 2 grasslands in Indonesia, 
integrated cattle and soy farming in Brazil and increasing 
sugar cane yields in the Philippines. In these cases we have 
found that it should be possible, by targeting biofuel crop 
expansion into appropriate situations and applying good 
agricultural practice, to significantly reduce the risk of indirect 
land-use change. Such measures should have the dual 
benefit of reducing impacts on food prices. 

If agricultural expansion for biofuel production can be 
effectively incentivised to follow these suggested paths, it 
should be possible to produce very substantial volumes of 
biofuel without causing indirect land-use change. If coupled 
with good practice on environmental and social sustainability 
in general, this provides the promise of fully sustainable 
biofuels from crops. 

We have also looked at the indirect effects of diverting wastes 
and by-products to biofuel use. Where such products have 
existing uses, it is possible that diversion to biofuel could 
actually result in a net increase in emissions. While there 
is still substantial uncertainty around these indirect effects, 
we have been able to identify with confidence: cases where 
indirect effects will reduce the benefits of using wastes and 
by-products, such as UK tallow; and cases where the indirect 
effects will actually enhance the benefits, such as methane 
from UK municipal solid waste (MSW). This information will 
provide an important contribution to the debate on which 
biofuel feedstocks should be categorised as 'wastes and 
residues' and count twice towards targets under the RED. 

Agriculture 

The UK biofuels market driven by the RTFO is yet to have a 
large impact on agriculture in the UK. Biofuels from UK grown 
crops made up at least five percent of the total supplied under 
the RTFO in 2008/09. Although the RTFO has absorbed 
about four percent of the annual UK oilseed rape crop 
and about eight percent of the sugar beet crop, overall the 
quantities of biofuel sourced from UK crops are still relatively 
low. There is, however, optimism in UK agriculture that as 
the biofuel market grows, it will provide a valuable alternative 
market for agricultural commodities. Biofuels crops for the 
RTFO have used an estimated 33,000 hectares (ha) of land 
in the UK. 



2 Areas of cleared forest in Indonesia have become overgrown by Imperata. 
This grass prevents the land from developing naturally into secondary forest 
and is therefore considered to be problematic (Reinhardt et al., 2007). 



Year One of the RTFO 



Renewable Fuels Agency 5 




Biofuels from crops grown overseas made up at least 64% of 
the total supplied under the RTFO in 2008/09. It is estimated 
that aPout 1.3 Mha of land outside the UK were used for 
crops producing Piofuel feedstocks for the UK market, 
primarily soy in the USA and Argentina and oilseed rape in 
Germany. The amount of land used for soy is particularly high 
Pecause of its relatively low yield of oil per hectare. However, 
the co-products such as soy meal provide much of soy's 
value as a crop. 

There are several areas in which changes to typical agricultural 
practice may Pe aPle to deliver reductions in greenhouse 
gas emissions. The Piofuels market may Pe a driver for 
these improvements, especially if effective incentivisation of 
Piofuels delivering Petter carPon savings is introduced. The 
application of the RTFO Meta-Standard for auditing sugar 
cane cultivation in Brazil is an example of the RTFO already 
driving a wider improvement in agricultural sustainaPility, with 
the audited plantations supplying sugar not only for ethanol 
Put also for food use. 



Other economic activities 

Although an effective driver of the market for Piofuel, the 
RTFO did not, during 2008/09, drive increases in Piofuel 
production capacity in the UK. While anticipation of the 
RTFO may have been a factor in several planned facilities, 
adverse market conditions have resulted in several planned 
investments failing to materialise. Perhaps the most important 
adverse external factor for UK production was the existence 
of US subsidies that have since been judged unfair by the 
EC. More recently, the application of countervailing tariffs for 
US imports has been accompanied by reductions in volumes 
of biodiesel reported from US soy. 

There is evidence that a number of factors have contributed 
to a difficult investment environment in the UK. These include 
the US subsidies, the identification of a discrepancy 3 in the 
RTFO, a reduction in the expected volume targets under the 
RTFO and the general economic climate. A period of market 
stability may help investor confidence to be rebuilt. 

The costs of biofuel production were such in 2008/09 that 
it was possible to supply biofuel profitably, given the 20p 
per litre tax incentive, without needing to recoup value from 
certificates. Fossil fuel suppliers that have blended biofuel 
under the RTFO have therefore actually been able to achieve a 
cost saving. This is likely to have affected the value of RTFCs, 
which was expected to reflect the additional cost of biofuel 
over fossil fuels. There is also evidence from consultation 
with suppliers that the identification of the discrepancy in 
the RTFO caused a reduction in demand for, and value of, 
RTFCs. It has been reported by suppliers that the value of 
RTFCs fell towards zero directly after the discrepancy was 
announced. 



The RTFO has resulted in additions to several existing 
sustainability standards. The UK's Assured Combinable 
Crops Scheme standard was enhanced to provide assurance 
against loss of carbon stocks in order to meet the RTFO 
Meta-Standard. The Round Table on Responsible Soy has 
also been enhanced following input from the RFA - the social 
criteria of the latest version are now fully compliant with the 
Meta-Standard. 

The RTFO has not yet, however, driven a significant increase 
in markets for sustainable certified feedstock from overseas 
- for instance, only 0.5% of palm oil was reported as 
Roundtable on Sustainable Palm Oil certified despite a large 
surplus of certified feedstock on the market in 2008/09. 



With the expected removal of the duty incentive for liquid 
biofuels, except biodiesel from used cooking oil, in April 
2010, the ability to derive value through trading certificates is 
likely to become much more important to biofuel production 
businesses in future. 

Sustainable development 

Agriculture is a significant contributor to the GDP of many 
developing economies. In 2008/09, 24% of the biofuel 
used in the UK came from Brazil, Argentina, Malaysia and 
Indonesia (with small volumes imported from Pakistan and 
Malawi). This represents a revenue stream potentially worth in 
excess of £1 00 million per annum to the developing world. In 



3 The discrepancy was that fossil fuel blended with biofuel before the duty 
point did not incur an obligation. This was rectified for the 2009/1 reporting 
year. 



6 Renewable Fuels Agency 



Year One of the RTFO 



2008, however, the Gallagher Review identified that biofuels 
still only accounted for about 1 % of global cropland. 

Biofuel cultivation and production industries support a large 
number of jobs in exporter countries, but our case studies of 
Brazilian sugar cane (1 4% of reported fuel came from sugar 
cane) and Malaysian palm oil (10% of reported fuel came 
from palm oil) production demonstrate that increased export 
earnings for the country at large do not necessarily translate 
into sustainable development for rural communities. 

In Malaysia, oil palm cultivation generates 5% of GDP. 
However, in parts of Malaysia, palm oil expansion continues 
to be a driver of land conflict. Where local and indigenous 
communities lose access to land, they lose access to 
forest resources that can provide food and income security. 
Plantations are large employers, providing jobs to Malaysians 
and immigrant workers, but in many cases estate wages may 
not be enough to lift people out of poverty. Nevertheless, 
smallholders should be able to achieve good returns from 
palm plantations, and increased uptake of the Roundtable 
for Sustainable Palm Oil initiative should result in improved 
conditions for workers and locals. 

In Brazil, sugar cane cultivation is important to the economy, 
generating 2.5% of GDP, with the ethanol industry 
contributing a further 1.1%. Wages for sugar cane workers 
are typically higher than in other areas of agriculture, although 
cane production is not considered to have a significant 
overall positive impact on poverty or inequity, and may lead 
to concentration of wealth. The Brazilian sugar cane industry 
has been criticised by the media and NGOs for social 
problems, particularly in relation to working conditions of the 
large manual workforce used in harvesting and the use of 
forced and child labour. Both the Brazilian government and 
industry are making significant efforts to improve the working 
conditions and eradicate bonded labour and use of underage 
workers. 

In general, while biofuels have the potential to improve 
livelihoods in the developing world, expanded agricultural 
production is not guaranteed to be a driver of sustainable 
development. Ensuring smallholder involvement and adoption 
of decent living wages is likely to improve outcomes for poor 
people's livelihoods. 

The environment generally 

Expansion of agricultural areata support biofuel production, as 
with any agricultural commodities, may threaten biodiversity. 
The implementation of sustainability criteria consistent with 
the RTFO Meta-Standard is likely to reduce the risk of such 



impacts. The Renewable Energy Directive sustainability 
criteria will provide protection for highly biodiverse areas. 
Potential consequences of biofuel agriculture include soil 
erosion and water pollution. In addition, the use of agricultural 
chemicals and burning of crops in some countries can cause 
air pollution. The application of environmental sustainability 
criteria can also provide some assurance against this. 

In the UK, almost ubiquitous application of sustainability 
schemes for biofuel agriculture provides good assurance. 
99% of fuel from the UK met environmental sustainability 
standards. Of the 20% of fuel meeting environmental 
sustainability standards for the RTFO as a whole, 18% 
was either from UK crops, or produced from wastes or 
by-products. 

On the other hand, only 4% of the fuel from feedstocks 
cultivated outside the UK met sustainability standards. Clearly, 
this provides little assurance about the way the feedstock 
was grown and any environmental and social impacts it may 
have had. 

The effectiveness of the Administrator 

In 2008/09, we have delivered value for money, and 
performed all the functions required of us by the RTFO Order. 
All obligated parties under the RTFO have been identified, 
and met their Obligations in 2008/09 by the redemption of 
certificates. There was only one case of erroneous award of 
certificates, which was corrected, and no known award of 
certificates to fraudulent claimants. Our annual stakeholder 
surveys have demonstrated a high level of satisfaction with 
our work. 

The Gallagher Review, which we published in July 2008, was 
widely praised as an important contribution to the debate 
on the indirect effects of biofuels production. Our ongoing 
programme of research aims to take this contribution forward. 
Our recent work on avoiding indirect land-use change has 
had a positive initial reception from experts in the field. We 
have been actively involved in sharing our work on indirect 
effects and sustainable biofuel production with stakeholders 
not only within the UK, but also throughout the European 
Union and globally. 

Most of all, our reporting on the biofuels supplied under the 
RTFO is world leading, not only by being the first data of 
this kind to be released, but in demonstrating a commitment 
to providing the public with environmental data as promptly 
as possible in the most useful practical format. We expect 
this reporting to be a benchmark for biofuel sustainability 
reporting internationally in the years to come. 



Year One of the RTFO 



Renewable Fuels Agency 7 



Introduction 



This is the Renewable Fuels Agency's first Annual Report 
to Parliament on the Renewable Transport Fuel Obligation, 
covering the period 1 5 April 2008 - 1 4 April 2009, as required 
under the Renewable Transport Fuel Obligations Order 2007 
(as amended). 

The aim of this report is to provide a post-implementation 
review of the first year of the Renewable Transport Fuel 
Obligation (RTFO), and includes consideration of the national 
and global impacts of the supply of biofuel in the UK. 

Background 
Biofuels 

Every year nearly 50 billion litres of road fuel are consumed in 
the UK. The resulting carbon emissions account for around 
one fifth of the UK's total annual emissions. 

Biofuels are fossil fuel substitutes. They can be made from 
a range of agricultural crops - oily crops for biodiesel, and 
sugary or starchy crops for bioethanol or from by-products 
and wastes like used cooking oil, tallow and municipal solid 
waste. Currently, the two most widely used biofuels in the 
UK are bioethanol and biodiesel, although there is also a 
small market in the supply of pure plant oil (PPO) and biogas, 
typically sold for fleet use. Other fuels such as hydrogenated 
vegetable oil (HVO) as a diesel substitute, and biobutanol as 
a petrol substitute, are expected to be used in the future, as 
more advanced biofuel technologies become commercially 
mature. 

Blended insmallquantitiesintofossilfuels.ethanoland biodiesel 
can be safely used in today's road vehicles. Currently blends 
of up to five percent biofuel can be sold without additional 
labelling. This will rise to seven percent for biodiesel from 
1 April 2010. An increase in ethanol blending is also likely in 
the future. It is also possible to use higher blends of biofuel 
(e.g. B100 - 100% biodiesel and E85 - 85% ethanol) but this 
may require modifications to engines. 

The Renewable Transport Fuel Obligation 

In response to the significant threat posed by climate 
change, the UK has national and international commitments 
to substantially reduce its carbon emissions and to increase 
the use of renewable energy, including in transport. 

The RTFO sets targets for increasing the use of renewable 
fuels in UK road transport with the aim of reducing 
carbon emissions. The RTFO is likely to be the basis of 
the implementation of the transport element of the EU's 
Renewable Energy Directive (RED), which sets long term 
targets for the use of renewable fuels in transport to 2020. 




The RTFO puts an obligation on refiners and importers of 
fossil fuels supplying at least 450,000 litres a year ('obligated 
suppliers'). In 2008/09, the Obligation was to ensure that 
2.5% 1 by volume of the road fuel they supply in the UK is 
made up of renewable fuels. 

These obligated suppliers must demonstrate that they have 
met their Obligation by redeeming Renewable Transport Fuel 
Certificates (RTFCs) to the Renewable Fuels Agency (RFA) at 
the end of the year. One RTFC is awarded for every litre (or 
kilogram in the case of biogas) of biofuel reported to the RFA, 
and an obligated supplier can obtain them either by supplying 
biofuel itself, or by buying them from biofuel suppliers. 

Non-obligated biofuel suppliers registered under the RTFO 
also report to the RFA, receive RTFCs and can sell their 
certificates. Trading certificates provides potential financial 
support for the production of biofuels. The RTFO is set to 
become the prime mechanism to support the supply of 
biofuels in the UK (a 20p per litre duty incentive is due to 
be removed from April 2010, except for biofuel from used 
cooking oil which will retain the duty incentive for a further two 
years). The value of certificates, as tradable commodities, is 
determined by the market. 

There is also an option to 'buy-out' of the Obligation for 
15p per litre instead of redeeming certificates. This acts as 
a 'safety valve' - if the additional marginal cost of supplying 
biofuel compared to fossil fuel were to rise above 1 5p per 
litre (or 35p per litre taking into account the current duty 
incentive), suppliers would be able to meet their Obligation 
more cheaply by paying the buy-out than by supplying 
biofuel. 



1 The legal Obligation in 2008/09 was effectively reduced by over half by a 
discrepancy in the RTFO Order, see Performance of the RFA, page 1 1 . 



8 Renewable Fuels Agency 



Year One of the RTFO 



The RFA's reporting and research helps to move forward 

the biofuel sustainability agenda' 



The Renewable Fuels Agency 

The RFA is the UK's independent sustainable fuels regulator, 
charged by the UK Government with running the RTFO. 
It awards Renewable Transport Fuel Certificates (RTFCs) 
to suppliers of biofuels in the UK, ensures that obligated 
suppliers meet their annual Obligation and runs a world 
leading carbon and sustainability (C&S) reporting system. 
The RFA encourages UK suppliers to source the most 
sustainable biofuels, and its reporting and research helps to 
move forward the biofuel sustainability agenda. 

Suppliers of biofuels claiming RTFCs must report the volume 
and C&S characteristics of their fuel through our online 
reporting system. Every month the RFA reports on the 
biofuels supplied in the UK, every quarter on the performance 
of individual suppliers and every year the RFA publishes a 
report such as this on the wider impacts of the RTFO. These 
reports are the first of their kind in the world. 

Driven by a proactive and open approach to stakeholder 
dialogue, the RFA engages stakeholders in the UK and 
beyond through regularly hosting workshops, attending 
meetings and conferences and through a range of external 
publications. The Agency is a small organisation, led by 
an independent board with six members including our 
Chief Executive, and with fourteen staff. It was legally created 
in October 2007 as a Non-Departmental Public Body, 
sponsored by the Department for Transport. 

The C&S reporting system is central to the RTFO, enabling 
monitoring of the carbon emissions and sustainability of 
biofuel supplied in the UK. This reporting system is intended 
to be a driver of sustainability, and a stepping stone to 
mandatory sustainability criteria. As other nations in the EU 
and elsewhere introduce their own biofuel incentives and 
mandates, many of them have looked to the RTFO system 
as a useful reference model and to the RFA as a source of 
expert advice. 

Carbon, sustainability and the RTFO Meta-Standard 

Carbon reporting under the RTFO is based on lifecycle 
analysis of emissions from direct land-use change, cultivation, 
processing and transport of biofuels. Suppliers can report 
using our default values for fuel type, feedstock and country 
of origin, or calculate actual emissions using real data. 

Sustainability reporting under the RTFO is based on a 
meta-standard approach. Existing sustainability standards 
are compared to the RTFO Meta-Standard. The 
environmental principles are that biofuel cultivation should 
not cause loss of carbon stocks or biodiversity or damage 



air, soil or water quality. The social sustainability principles are 
that cultivation should respect land rights and workers rights. 
Existing schemes for agricultural sustainability assurance 
are 'benchmarked' against these principles and criteria. 
A scheme that covers an adequate number of the criteria 
meets the 'Qualifying Standard' and can be reported as 
assurance of the sustainability of a biofuel. It is also possible 
for a company to arrange its own independent auditing 
against the Meta-Standard. 

Biofuels from wastes and by-products are considered to 
automatically meet the Qualifying Standard for social and 
environmental sustainability. 

For a company to report that their feedstock met the Qualifying 
Standard there must be robust and reliable audit procedures 
for agricultural production, and a chain of custody to link the 
fuel being supplied in the UK to sustainable production. 

The RFA is supporting the development of new schemes like 
the Better Sugarcane Initiative; has benchmarked the testing 
versions of developing schemes like the Round Table on 
Responsible Soy (RTRS); is engaging with existing schemes 
like the Roundtable on Sustainable Palm Oil (RSPO) to explore 
improvements; and continuously monitors the effectiveness 
and compliance with the Meta-Standard of benchmarked 
schemes. 

By demonstrating the importance and achievability of 
sustainability certification, the biofuels industry can lead 
a global shift to a more sustainable model of agriculture. 
Benchmarking schemes can support their expansion and 
development by providing a clear potential market for 
certified fuel. 

How to read this report 
Dates 

In general, unless otherwise stated it should be interpreted 
that the information in this report relates to the 2008/09 RTFO 
reporting period. The conclusions and opinions expressed 
here are based on the best data available to us at the time 
the report was written. 

RED and FQD 

The EU Renewable Energy Directive (RED), and revisions to 
the Fuel Quality Directive (FQD), are due to be implemented 
by December 2010. At various points we have made 
reference to parts of these directives that are, to the best 
of our understanding, expected to be included in the UK 
implementation. The RFA is not a policy setting body, and 
any commentary we have made is not definitive nor should it 



Year One of the RTFO 



Renewable Fuels Agency 9 



be considered indicative of the expectations of Government. 
The Department for Transport is responsible for implementing 
the measures outlined in the RED and FQD, and should be 
contacted for any enquiries regarding implementation or 
other aspects of biofuel policy. 

Content supported by third party studies 

Several chapters and sub-chapters of this document draw 
on information published in third party studies commissioned 
by the RFA. These supporting studies are available for 
download at www.renewablefuelsagency.gov.uk/yearone. 
The content of this report should be understood to represent 
the views and opinions of the RFA. The content of the 
supporting studies does not necessarily represent the views 
and opinions of the RFA. In some cases elements of this 
report closely reflect sections, in particular the executive 
summaries, of the supporting documents. The use by the 
RFA of elements of text taken directly from any supporting 
study should be taken as indicating that such section of 
text accurately reflects the views and opinions of the RFA. It 
should not be taken to necessarily imply that any or all of the 
other text comprising the supporting study represents the 
views or opinions of the RFA. 

Errors and omissions 

In assembling this report, every care has been taken to ensure 
that the text and any other information contained within 
it are accurate to the best of our knowledge at 4 January 
2010. However, in any document of this length, it is possible 
that unintended errors or omissions may be introduced. 
Should you identify any information in this document that 
you believe to be erroneous, please inform us by emailing 
contact@rfa.gsi.gov.uk. Where any errors have been 
identified, errata indicating this will be published on 
our website www.renewablefuelsagency.gov.uk/yearone, 
alongside the report itself. We recommend that readers 
should check our website for errata before reproducing any 
information from this report. 



10 Renewable Fuels Agency Year One of the RTFO 



Performance of the RFA 



The RTFO Order calls on us to assess the effectiveness of 
our performance of our duties as the RTFO administrator. 
This assessment is to include: 

• The value for money we provide; 

• The effectiveness of advice given to transport fuel 
suppliers; 

• The accuracy of our activities when processing information 
and evidence including the numPer of certificates issued 
erroneously; 

• The effectiveness of our enforcement activities. 

The world's first biofuel sustainability 
regulator 

When the RFA was created in NovemPer 2007, it Pecame 
the world's first Piofuel sustainability regulator. Tasked with 
the administration of the RTFO, we became the operators 
of an entirely new online carbon and sustainability reporting 
system. 

At the core of our duties is the administration of the volume 
reporting and certificate award mechanism of the RTFO. Our 
performance of these core duties has been a success. The 
online reporting system and underlying software database 
have been working since the launch of the RTFO. We 
have been able to successfully substantiate (either through 
reconciliation with HMRC or additional checks) the volumes 
of fossil fuel and biofuel reported to us. The certificate award 
and trading systems have both worked, enabling all obligated 
suppliers to meet their 2008/09 obligations with certificates 
either earned or traded. 

The RTFO goes further than simply creating a market for 
biofuels - it is also intended to drive biofuel sustainability. 
The Government has set targets for individual supplier 
performance on sustainability. Our carbon and sustainability 
reporting guidance, built around a lifecycle carbon 
reporting methodology and the RTFO Sustainability 
Meta-Standard, has achieved a global prominence by virtue 
of being the first system brought into active regulation. 
Active engagement with fuel suppliers has enabled a smooth 
transition to carbon and sustainability reporting, with 73% 
of those reporting on our system agreeing that while data 
collection itself may have been challenging, the system is 
easy for them to use. 

The success of the administrative and IT systems was aided 
by extensive piloting and training with suppliers before 
the system was operational. This was initially carried out 
by the Department for Transport and Low Carbon Vehicle 
Partnership before being handed over to the RFA. 



The carbon and sustainability reporting system is based on a 
meta-standard approach which recognises existing feedstock 
standards that cover core sustainability principles. However, 
there is currently a shortage of standards and, even where 
available, many do not cover the full set of issues, such as 
carbon stocks, fundamental to biofuel sustainability. We have 
achieved some success working with standards bodies and 
individual suppliers to drive towards this standard. 5.2% of 
the biofuel fuel met the Assured Combinable Crops Scheme 
which operates in the UK. This standard was strengthened to 
qualify under the RTFO as a result of engagement between 
the RFA and the awarding body. We also worked closely with 
a supplier that took the initiative to undertake an independent 
audit against the Meta-Standard. These audits allowed an 
additional 5.8% of total biofuel to be reported as meeting the 
Environmental and/or Social Qualifying or Meta-Standard. 

Beyond 2008/09, our workto support standards development 
and the implementation of independent auditing by suppliers 
is continuing. Our reporting is putting pressure on suppliers to 
perform on sustainability, and our work is helping to make the 
certified sustainable fuel needed to meet the Government's 
target increasingly available. We are also continuing to 
develop our scheme to take into account the latest science 
and regulatory framework. 

On top of the challenging workload anticipated for the Agency 
in fulfilling our new responsibilities, in February 2008 we were 
asked by the Secretary of State for Transport to undertake a 
major review - the 'Gallagher Review of the indirect effects of 
biofuels production'. 

The Gallagher Review, which we published in July 2008, 
has been widely praised as an important contribution to the 
debate on the indirect effects of biofuels production, and 
confirmed our position as a world leader on issues around 
biofuel sustainability. Our ongoing programme of research is 
taking this contribution forward. As an example, our recent 
work on avoiding indirect land-use change has had a very 
positive initial reception from experts in the field, and is the 
first practical approach to defining company level activities 
to avoid indirect land-use change to be laid out with a clear 
methodology. 

There is always room for improvement, and we are committed 
to continue to act on feedback from stakeholders, to innovate 
and to work to maximise our operational efficiency and value 
for money. After the first year of the RTFO, we feel able to 
assert that by combining effective and efficient administration 
of the RTFO with cutting edge sustainability reporting and 
research, we have met our obligation to deliver excellence 



Year One of the RTFO 



Renewable Fuels Agency 1 1 



to the British public. We have also laid the foundation for an 
increasingly successful biofuels policy in the UK implemented 
through a developing RTFO. 



In mid October 2008 identified a discrepancy was identified in 
the RTFO Order. This had been drafted in away inconsistent, 
on one point, with the intent of the policy. The legal effect 
was that any fossil fuel that crossed the 'duty point' 1 blended 
with biofuel was not obligated. The practical effect of this 
was to more than halve the volume of fossil fuel that was 
obligated (see Impacts of the RTFO on UK business, page 
45). This discrepancy was corrected by the Department in an 
amending order that took effect from the start of the 2009/1 
obligation period. 



In 2008/09, our budget was £1 .5M out of which we spent 
£1 .3M. Of this, £607,000 was spent on staff wages and other 
remuneration. In order to keep costs to a minimum, the RFA 
did not fully utilise its call off contract with the consultancy that 
designed our processes and IT operating system, preferring 
to rapidly develop our in-house capabilities in this area. Of the 
£373,500 spent on goods and services via contracts, 88% 
was awarded competitively. Single tender actions have to be 
signed off either by the Accounting Officer or the RFA's board 
depending on their value. Our internal procurement practices 
were deemed to be acceptable by our internal auditors. 

All payments made in 2008/09 were correct and made within 
the Government's target for public sector organisations of 
30 days. 



The RFA acted promptly to inform all registered suppliers 
of this issue and then to keep them informed during the 
development of the Government's response. We worked 
closely with the fossil fuel suppliers affected to ensure that their 
data was correctly entered given the revised understanding 
of the Order. 

We believe that after the identification of the discrepancy, the 
actions we took were effective in minimising any additional 
burden on reporting suppliers and demonstrated our 
commitment to transparent engagement. 



The RFA demonstrates value for money in a number of ways, 
as outlined below. 

As a small NDPB we rent our accommodation and IT services 
from our sponsor department (DfT), This enables us to 
provide a secure hosting environment for the data we collect 
on fuels supplied into the UK effectively free of charge as our 
server sits within the pre-existing DfT secure environment. 

In 2008/09 the RFA started to use its own standalone 
accountancy system (for the part of 2007/08 for which we 
were in existence we used DfT systems). After considering 
the options available, we chose to utilise a standard, widely 
used package which presented a considerable saving over 
implementing a revised system introduced for DfT (which 
is suitable for much larger organisations). Payroll was 
outsourced to a bureau. 



Our accounts for 2008/09 were approved by the Comptroller 
and Auditor General on 9 July 2009 and laid before the 
House on 15 July 2009. 

Our most recent stakeholder survey (November 2009) 
demonstrates that our stakeholders are generally happy with 
our performance. The full results are available on the RFA 
website. 

• 86% said that they were either fairly, very or extremely 
happy with the quality of our monthly and quarterly reports. 

• 93% were fairly, very or extremely happy with the response 
time to queries raised with the RFA. 

• 87% were fairly, very or extremely happy with the quality of 
the advice they had been given by the RFA. 

• 73% agreed that our online data collection system was 
easy to use. 

• However, among users of the ROS 2 system only 52% 
and 57% agreed with the statements that the RFA was 
quick to 'raise any necessary questions about ... returns' 
and 'to resolve those questions'. We are in the process of 
making a number of changes to speed up this process. 



1 Road fuel duty is payable on fuel supplied into the UK market. The 'duty 
point' is a technical concept which represents the location of fuel when fuel 
duty becomes liable - usually at import terminals and oil refineries. 



2 ROS (RFA Operating System) is the online system which the RFA uses to 
collect data from suppliers. 



1 2 Renewable Fuels Agency 



Year One of the RTFO 



'86% of our stakeholders are happy with the quality 
of our monthly and quarterly reports' 



Advice 

By offering clear and appropriately detailed advice we have 
ensured that suppliers and other stakeholders are able to 
interact with the RFA in confidence. 

The RFA continues to offer advice to stakeholders by a 
number of methods, including: 

• workshops and meetings; 

• telephone conference calls; 

• publication of detailed guidance manuals; 

• news updates (both email and on ROS); 

• e-mails and telephone calls on an individual basis. 

There have been no formal complaints received by the RFA. 
However, there have been a number of concerns raised 
by stakeholders, for example concerning the time taken to 
respond to requests for advice. These have been addressed 
by the RFA. 

Accuracy 

To claim a certificate, suppliers must report the volume of 
biofuels supplied and the C&S information related to that fuel. 
The RFA conducted regular checks on the data to identify 
potential errors and sought corrections from suppliers. This 
process reduced the need for changes following verification 
at the end of the reporting year. 

The RFA produced monthly reports from the C&S information 
provided by suppliers to provide regular updates to 
stakeholders on the progress of the RTFO. The online reports 
provided a wealth of detailed information on the origin and 
GHG effects of the fuels, enabling stakeholders to compare 
the performance of supplier. Despite the complexity and 
volume of the data, monthly reports were produced that were 
accurate, accessible, and widely referenced both in the UK 
and abroad. 

In general, the certificate award system has worked. 
Approximately 1 .3 billion certificates were issued during 
2008/09. There was one failure of the control system for 
awarding certificates in the obligation year 2008/09. On this 
occasion a supplier was erroneously awarded its certificates 
twice by the RFA for a particular month which amounted to 
approximately 54 million certificates. The certificates were 
removed from the system and there was no effect upon the 
RTFO as a whole or any supplier in particular. The certificate 
award system has now been modified and staff trained in the 
new procedures to ensure that this cannot happen again. 



Following these changes, no further erroneous awards 
have occurred and we consider our systems for operating 
the RTFO, and in particular for the award of certificates, 
to be robust. There is a continual program of testing and 
reviewing of our systems to ensure that they are resilient to 
the possibility of fraud. 

Counter fraud 

There have been four attempts to obtain certificates 
incorrectly; all four were identified at an early stage. 

Three cases related to figures for fuel being entered that 
could not be substantiated or were materially incorrect. In 
two cases the suppliers involved have now ceased trading 
and the investigations are closed. In the third case, the 
supplier has decided not to pursue the application for 
certificates. Given the circumstances and the small number 
of certificates involved the RFA has decided to refuse the 
certificate award and take no further action. The fourth case 
involved entries onto ROS over a six month period. Following 
a joint investigation with HMRC the RFA resolved the matter 
by issuing those certificates that were correctly claimed for; 
those certificates that were incorrectly claimed for were not 
issued. 

Our counter fraud activities have identified a number of 
practices which, although they presented no threat to the 
RTFO, breached HMRC regulations or guidance. These 
issues have been raised with the relevant teams within 
HMRC. 

In the last year, our counter fraud activities have helped us to 
continue to build links with other enforcement and regulatory 
bodies, to ensure a robust and consistent approach. In 
order to further develop our skill in this area RFA staff have 
undertaken liaison meetings and attended training events 
relating to counter fraud and compliance. 



Year One of the RTFO 



Renewable Fuels Agency 1 3 



Acronyms and abbreviations 



ACCS - Assured Combinable Crops Scheme 

BRE - Better Regulation Executive 

BSI - Better Sugar Cane Initiative 

CEN - European Committee for Standardization 

C0 2 - carbon dioxide 

C0 2 e - carbon dioxide equivalent 

DECC - Department for Energy and Climate Change 

DEFRA - Department for Environment, Food and Rural Affairs 

DfT - Department for Transport 

DNDC - DeNitrification Decomposition 

EC - European Commission 

EU - European Union 

EUROPIA - European Petroleum Industry Association 

FAME - fatty acid methyl ester 

FAO - Food and Agriculture Organisation (of the United Nations) 

FQD - Fuel Ouality Directive 

GBEP - Global Bioenergy Partnership 

GDP - gross domestic product 

GHG - greenhouse gas 

ha - hectare 

HMRC - Her Majesty's Revenue and Customs 

HVO - hydrogenated vegetable oil 

iLUC - indirect land-use change 

IPCC - Intergovernmental Panel on Climate Change 

IPIECA - International Petroleum Industry Environmental Conservation Association 

ISO - International Organization for Standardization 

ISAE - International Standard on Assurance Engagements 

LCA - lifecycle analysis 

MSW - municipal solid waste 

N 2 - nitrous oxide 

OSR - oilseed rape 

PPO - pure plant oil 

POME - palm oil mill effluent 

RED - Renewable Energy Directive 

RIA - regulatory impact assessment 

RFA - Renewable Fuels Agency 

ROS - RFA Operating System 

RSB - Roundtable on Sustainable Biofuel 

RSPO - Roundtable on Sustainable Palm Oil 

RTFC - Renewable Transport Fuel Certificate 

RTFO - Renewable Transport Fuel Obligation 

RTRS - Round Table on Responsible Soy 

SAN/RA - Sustainable Agriculture Network/Rainforest Alliance 

UCO - used cooking oil 

USDA - United States Department of Agriculture 



14 Renewable Fuels Agency Year One of the RTFO 



Section 2 

RTFO 2008/09 




Year One of the RTFO 



Renewable Fuels Agency 1 5 



Year of RTFO results 



Of the 2008/09 data, 94.3% has been verified. Another 0.3% 
of data from smaller suppliers was not subject to verification. 
The remaining 5.4% is from suppliers who did not adequately 
verify their data. This 5.4% has not been counted towards 
overall performance against Government targets. 



As well as environmental principles, the RTFO Meta-Standard 
has criteria for social sustainability. In general, sustainability 
schemes have less coverage of social than environmental 
criteria, and the proportion of fuel meeting the Social 
Qualifying Standard has therefore been lower. 



The 2008/09 supply was dominated by biodiesel, reflecting 
the fact that biodiesel supply can be more easily integrated 
into existing infrastructure. 



1,284m 

litres of biofuel were supplied 



2.7% 



of UK road transport fuel was biofuel, above the 
Government's target of 2.5% 



94.3% 

of the data was verified 



82% 



of biofuel supplied was biodiesel 



0.4 



m 



kilograms of biogas was supplied 



46% 



average greenhouse gas saving was achieved, 
above the Government's target of 40% 



64% 



of requested data was reported, above the 
Government's target of 50% 



9% 



of fuel came from UK feedstocks 



The greenhouse gas savings reported do not include any 
indirect effects, and may not include all emissions from direct 
land-use change. 



20% 



of biofuel feedstocks met the Environmental 
Qualifying Standard, below the Government's 
target of 30% 



18% 



of biofuel feedstocks met the Social Qualifying 
Standard 



67 



m 



litres came from feedstock grown to a qualifying 
sustainability standard 



75 



m 



litres were independently audited to fully meet, or 
qualify against, the RTFO Meta-Standard 



157 



m 

litres came from wastes and by-products 



89 



m 



litres came from feedstock grown to a 
benchmarked standard 



99% 



of fuel from UK feedstocks met the Environmental 
Qualifying Standard 



1 6 Renewable Fuels Agency 



Year One of the RTFO 



Greenhouse gas savings of biofuels by feedstock and country of origin 



100% 

80% 

60% 

g 40% 



O 20% 
CD 

0% 



-20% 
-40% 



Bg Biogas SB Sugar beet 

Ch Cheese by-product Sul Sulphite 
msw municipai solid waste Unk Unknown 




Oilseed rape 



Verified data 2008/09 obligation year 



Figure 2.1: 
GHG savings 
by feedstock 
and country 



Volumes of biofuel by feedstock and country of origin 



200 



150 



100 



Bg Biogas SB Sugar beet 

Ch Cheese by-product Sul Sulphite 
msw municipal solid waste Unk Unknown 



.1 



m o 



CD 


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ill 



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Used cooking oil Unk 



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Ch Mol SB Sugarcane Sul Unk 
Bioethanol 
Verified data 2008/09 obligation year 



Figure 2.2: 
Biofuels by 
feedstock 
and country 



Proportion of biofuel meeting 
sustainability standards 



Data capture 



100% 
90% 
80% 
70% 
60% 
50% 
40% 
30% 
20% 
10% 
0% 



70% 




14% 



4% 



None/unknown 



Other Standards 



Qualifying Standards 



RTFO Meta-Standard 



Verified data 

2008/09 obligation year 



Environmental Social 



Figure 2.3: 

Sustainability 

standards 



100% 
90% 
80% 
70% 
60% 
50% 
40% 
30% 
20% 
10% 
0% 




Unknown 
known 



Verified data 

2008/09 obligation year 



Feedstock Country Previous Sustainability Overall 



Figure 2.4: 
Data capture 



Year One of the RTFO 



Renewable Fuels Agency 1 7 



Supplier compliance with 
the RTFO 



For the 2008/09 obligation period all obligated suppliers 1 met 
their RTFO obligation by the use of certificates. No obligated 
supplier needed to pay into the 'buy-out fund', thus for the 
2008/09 obligation period the buy-out fund was zero. 



Obligated suppliers 


BP Oil UK Ltd 


Mabanaft UK Ltd 


Chevron Ltd 


Morgan Stanley Capital Group Inc 


ConocoPhillips Ltd 


Murco Petroleum Ltd 


Esso Petroleum Company Ltd 


Petroplus Refining Teesside Ltd 


Greenergy Fuels Ltd 


Shell UK Ltd 


Harvest Energy Ltd 


Topaz Energy Ltd 


Lissan Coal Company Ltd 


Total UK Ltd 



Table 2.1: Obligated suppliers 

We have developed an automated system that allows 
suppliers to trade certificates in an easy and secure manner. 
We believe our trading system is robust and effective. 

Revoked certificates and fraud 

There were only three instances of certificates being revoked 
during the 2008/09 obligation year. All three instances were 
input errors by the suppliers themselves and there was no 
perceived intention on the part of the suppliers involved to 
attempt to defraud the system. Two of the three instances 
were identified by RFA staff, with the third being identified 
by the company before the RFA's systems had alerted RFA 
staff. The certificates were revoked with the full co-operation 
of the suppliers. Additional systems have been put in place to 
stop certificates being issued in similar circumstances in the 
future. Revoked certificates accounted for 0.06% of the total 
number of certificates awarded. 



Certificates awarded 
Certificates revoked 



1,256,409,774 
692,324 



Table 2.2: Certificates awarded and revoked 

A number of visits were carried out to registered suppliers 
to review typical recording systems for C&S data. All firms 
involved co-operated fully and this allowed RFA staff to 



enhance their understanding of some of the issues regarding 
the evidence for sources and composition of feedstocks and 
biofuel. 

Year one certificate trading 

The first RTFCs for the 2008/09 period were issued in July 
2008. From this point up to 14 October 2009 (the end of the 
sixth RTFO quarter), there had been 96 trades of certificates 
from the 2008/09 obligation year. In the seventh RTFO 
quarter there continues to be an active market in the trading 
of certificates for the first obligation year. These certificates 
can be used to meet up to 25% of any company's obligation 
in 2009/10. Both auctioneers and brokers have become 
involved in the trading of certificates. 

Twenty four companies were involved in trading certificates 
(20 transferring in, 17 transferring out). This included 11 of 
the 14 obligated suppliers, 12 of 82 other fuel suppliers and 
one of three traders. This is less than a third of the companies 
registered on the RFA system. A few companies dominated 
the trading: 60% of trades involved one of three suppliers. 

Size of RTFC trades 



® 50 




0-0.01 0.01-0.1 0.1-1 1-10 10-100 

Size of RTFC trades (millions) 
Figure 2.5: Size of RTFC trades 

The majority of individual trades involved between 100,000 
and 1 ,000,000 certificates. There were a small number of 



1 Those companies supplying over 450,000 litres of relevant hydrocarbon 
oil into the UK. 



1 8 Renewable Fuels Agency 



Year One of the RTFO 



smaller trades, and a few very large trades - the largest 
being for 60 million certificates. The scarcity of smaller trades 
indicates that most of the biofuel-only suppliers did not 
access the 2008/09 certificate market, and therefore did not, 
to October 2009, realise any financial benefit from reporting 
under the RTFO. 

RTFCs traded 




Jul 2008- Oct 2008- Jan 2009- Apr 2009- Jul 2009- 
Oct 2008 Jan 2009 Apr 2009 Jul 2009 Oct 2009 

Figure 2.6: RTFC trades 

The majority of trading, about 155 out of 164 million 
traded certificates, occurred between fossil fuel suppliers. 
Biofuel suppliers were able to trade away just over 9 million 
certificates, mostly to fossil fuel suppliers. Companies that 
have opened accounts solely to trade certificates had no 
significant involvement in the market, however we believe 
that brokers have been active in the market. 

The market in RTFCs has grown since the start of the 
obligation, peaking in the first quarter of the second year. 
The quantity traded in this quarter was boosted by a single 
transfer of 60 million certificates. 

While the discrepancy in the RTFO may have affected 
certificate value, it did not prevent trades from taking place. 
However, most of this trading appears to have been between 
larger suppliers and anecdotal evidence indicates that this 
may have been the result of pre-existing contracts. 

Overall, the trading system is working as a mechanism to give 
obligated suppliers flexibility in meeting their obligations. A 
substantial number of certificates were traded between fossil 
fuel suppliers, and at the end of the first year all obligated 



suppliers were able to meet their obligation with certificates. 
Without trading this would not have been possible. 

The trading system has not yet, however, demonstrated itself 
as a support mechanism for biofuel-only suppliers. Most 
biofuel-only suppliers have not sold certificates. This may 
be linked to the lack of market stability and reportedly low 
certificate value in 2008/09. As the RTFO becomes the prime 
support mechanism from the UK Government for biofuel 
production from April 2010, the viability of biofuel supplier 
business models is likely to be partly dependent on them 
being able to access the certificate market in future. 



Year One of the RTFO 



Renewable Fuels Agency 1 9 



Supplier performance 



Companies supplying biofuels under the 
RTFO 

Fifty three suppliers of Piofuels for road transport reported to 
the RFA under the RTFO in 2008/09. Of these, 38 supplied 
Piofuels only; 15 also supplied fossil fuel, 14 of which were 
oPIigated. Suppliers must suPmit C&S data to the RFA on 
the Piofuels they supply under the RTFO. Those applying for 
over 450,000 RTFCs also have to supply an Annual Report 
to the RFA and oPtain independent limited assurance over 
the information supplied (see The verification process, page 
30 for more details). 

Targets 

The Government has set targets for three key aspects of the 
C&S reporting scheme. The targets are not mandatory (and 
there is no penalty for failing to meet them), Put they illustrate 
the level of performance which the Government expects from 
fuel suppliers over the oPIigation year. The targets increase 
over time with the expectation that the market for certified 
sustainaPle Piofuels will expand, and that certified feedstocks 
will Pecome more availaPle. The Government has said that 
the targets will Pe suPject to review in the light of suppliers' 
performance and other developments. 



Annual Supplier Target 



2008/09 2009/10 



Percentage of feedstock meeting a 
Qualifying Environmental Standard 

Annual GHG saving of fuel 
supplied 

Data reporting of renewable fuel 
characteristics 



30% 



40% 



50% 



50% 

45% 

70% 



2010/11 



80% 

50% 
90% 



Table 2.3: Government targets for supplier C&S 
performance 

Fossil fuel company performance 
Number of targets met 

ConocoPhillips, Greenergy and MaPanaft, Pased on their 
verified data, met all three of the Government's targets. 
Lissan 1 met all three targets Put as a low volume supplier of 
biofuels was not required to verify. 



Morgan Stanley and Topaz 2 failed to meet any of the targets. 
Prax 2 , BP 3 and Murco 3 reported meeting one or more targets, 
but did not achieve limited assurance. 



Number of targets 
met 


Fossil fuel company 






ConocoPhillips 


3 


Greenergy 


Lissan 3 




Mabanaft 






Esso 


2 


Harvest 


Petroplus 




Shell 


1 


Chevron 


Total 





Morgan Stanley 




3 


Prax 


No limited 
assurance. 


2 


BP b 


Targets 
claimed: 


1 


Murco 







Topaz 



a Lissan, as a low volume supplier of biofuels, were not required to 
verify their data 

b BP submitted a revised Annual Report after the deadline in which 
some of their data was verified 

Table 2.4: Number of targets met by each fossil fuel 
company 

Greenhouse gas savings 

Eight of the 15 fossil fuel suppliers we report on met the 
Government's carbon savings target of 40% for 2008/09; 
a further four were within 10% of achieving the target. 



1 Unverified: companies supplying less than 450,000 litres of biofuel per 
annum are exempt from the verification process. 



2 Unverified: Double Green, Ebony Solutions, V-Fuels Biodiesel and Prax 
failed to supply an Annual Report and verifier's opinion by the deadline. Topaz 
supplied an Annual Report without a verifier's opinion after the deadline. 
V-Fuels Biodiesel has gone into administration. 

3 Unverified: BP and Murco supplied an Annual Report and a verifier's 
qualified opinion, which did not meet the RFA's verification requirements of 
limited assurance. A late revised report from BP provided limited assurance 
for a portion of their data. 



20 Renewable Fuels Agency 



Year One of the RTFO 



Greenhouse gas savings 



100% 
90% 
80% 
70% 
60% 
50% 
40% 
30% 
20% 
10% 
0% 



m 

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not required to verify 

> f 0% from target 

< f0% from target 

at or above target 

target 



Verified data 2008/09 
obligation year 



Environmental standard 



80% 
70% 
60% 
50% 
40% 
30% 
20% 
10% 
0% 







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liiecl 














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ied 











. unverified 

not required to verify 
I > 10% from target 

< 10% from target 

at or above target 
■ target 



Verified data 2008/09 
obligation year 



Data capture 




U1W1U 



I unverified 
not required to verify 
> 1 0% from target 
< 1 0% from target 
at or above target 



P 



— target 



Verified data 2008/09 
obligation year 



Figure 2.7 a,b,c: 
Fossil fuel supplier 
performance against 
the Government's 
targets 



Year One of the RTFO 



Renewable Fuels Agency 21 



Supplier 


Known 
land-use a 


Proportion meeting an 
environmental standard 


Proportion meeting a 
social standard 


Greenhouse 
gas saving 


Accuracy 
level, (0-5) 


Data 
capture 


RTFO 


QS 


Other/ 

none/ 

unknown 


RTFO 


QS 


Other/ 

none/ 

unknown 


(0 
Q. 

a 

3 
(0 

3 
«^ 

"in 

0) 

O 
Li. 


BP 


27% 


0% 


6% 


94% 


0% 


6% 


94% 


58% 


1.8 


54% 


Chevron 


55% 


0% 


0% 


100% 


0% 


0% 


100% 


33% 


1.7 


57% 


ConocoPhillips 


50% 


64% 


0% 


36% 


0% 


0% 


100% 


42% 


4.1 


81% 


Esso 


6% 


3% 


0% 


97% 


0% 


0% 


100% 


43% 


1.9 


53% 


Greenergy 


78% 


16% 


27% 


57% 


18% 


29% 


53% 


61% 


3.4 


81% 


Harvest 


58% 


12% 


13% 


76% 


0% 


13% 


87% 


62% 


2.3 


70% 


Lissan 


100% 


0% 


100% 


0% 


0% 


100% 


0% 


85% 


2.4 


100% 


Mabanaft 


76% 


24% 


26% 


50% 


0% 


26% 


74% 


57% 


2.3 


77% 


Morgan Stanley 


3% 


0% 


3% 


97% 


0% 


3% 


97% 


21% 


1.0 


27% 


Murco 


66% 


0% 


0% 


100% 


0% 


0% 


100% 


33% 


1.8 


60% 


Petroplus 


81% 


0% 


18% 


82% 


0% 


18% 


82% 


43% 


2.6 


72% 


Prax 


64% 


0% 


64% 


36% 


0% 


64% 


36% 


68% 


1.8 


65% 


Shell 


67% 


0% 


11% 


89% 


0% 


11% 


89% 


45% 


1.9 


79% 


Topaz 


0% 


0% 


0% 


100% 


0% 


0% 


100% 


36% 


0.0 


0% 


Total 


58% 


2% 


3% 


95% 


0% 


3% 


97% 


36% 


2.2 


56% 



a the only known land uses reported were 'by-product' and 'cropland 
Table 2.5: Fossil fuel supplier performance 



Two suppliers reported that they met the target, Put their data 
was not verified. Morgan Stanley was the poorest performer, 
with verified information, achieving just 21% GHG savings 
relative to fossil fuel compared to an overall average for the 
RTFO of 46% (Fig. 2.7a). 

A numPer of suppliers collected actual fuel chain data to 
calculate their GHG emissions. Two thirds of ConocoPhillips' 
Piofuel, 14% of Lissan's, and less than 5% of Greenergy's, 
Harvest's, Petroplus' and Total's Piofuels were reported using 
actual data for the GHG calculation. 

Environmental sustainability 

Only four suppliers - ConocoPhillips, Greenergy, MaPanaft 
and Lissan 1 met the environmental sustainaPility target of 
30%. Prax 2 reported that they met the target, Put their data 
was not verified. Several suppliers (Chevron, Murco 3 , and 
Topaz 2 ) did not report any Piofuels meeting the qualifying 
environmental standard; Morgan Stanley, Esso and Total 



reported less than 5% of their Piofuels as meeting a qualifying 
environmental standard (Fig. 2.7P). This compares to an 
aggregate overall performance of 20%. 

Data capture 

Just two suppliers failed to meet the 50% data capture 
target - Morgan Stanley (27%) and Topaz 2 who failed to 
supply any C&S data. This compares to an aggregate overall 
performance of 64%. (Fig. 2.7c). 

Where did the fossil fuel suppliers source their 
biofuels from? 

Fossil fuel suppliers sourced their Piofuels from at least 
ten different feedstocks and 18 countries, of which 
seven feedstocks and nine countries dominated the mix 
(Figs. 2.8a,b). Oilseed rape was the main biofuel feedstock for 
Chevron, ConocoPhillips, Esso and Shell - sourced primarily 
from Europe. Morgan Stanley, Murco 3 , Petroplus and Total 
sourced primarily from US soy. BP 3 , Greenergy and Harvest 



22 Renewable Fuels Agency 



Year One of the RTFO 



Suppliers' biofuel mix by feedstock 




K 


N 


Q_ 


o 


cz 


a 


O CO 


o 


>^ 


to 

CD 

X 


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2W 


Q. 



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^ 


failed to 


qualified 


not 




















submit 


opinion 


required 
to verify 






















unve 


Tficd 














verified 











Other 
I Unknown 

I UCO 
Tallow 

I Sugar cane 
Sugar beet 

I Soy 

I Palm 

Oilseed rape 



'Other' includes 
molasses, sulphite 
& sunflower 



Verified data 2008/09 
obligation year 



Suppliers' biofuel mix by country of origin 



90% 

_ 80% 

f 70% 

£ 60% 

o 

£ 50% 

o 40% 

| 30% 

^ 20% 

10% 













■ 


























% 


N 






c 


c 


O co 




>^ 


+., 


a 


c >^ 


CO 


:=: 








CD 








O Q. 


CO 


CJ) 


CD 

03 
X 


CT3 




3 








Q_ 


(2 


ZI 


CO 
CO 

_l 


> 

CD 


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CO 

LU 


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c 

CD 


C 
CO 
JD 
CC 


O E 


Q_ 
O 


CO 


^ 














G 


^ 




D_ 








failed to 


qualified 


not 


















submit 


opinion 


requirec 

to verify 
























unve 


ified 














ve 


ificd 











Other 
I Unknown 
I United States 

United Kingdom 

Malaysia 

Indonesia 

Germany 

France 

I Canada 

I Brazil 

H Argentina 

'Other' includes 
Belgium, Denmark, 
Ireland, Malawi, 
Netherlands, Pakistan, 
Russia, Sweden & 
Ukraine 

Verified data 2008/09 
obligation year 



Figure 2.8 a,b: 
Biofuel feedstock and 
country of origin by 
fossil fuel supplier 



used significant volumes of Brazilian sugar cane reflecting 
the fact bioethanol makes up a significant proportion of their 
biofuel, whilst Mabanaft used UK sugar beet as their main 
bioethanol feedstock. Lissan 1 and Prax 2 primarily used the 
by-products UCO and tallow, respectively. 

A number of suppliers sourced from two feedstocks with 
higher GHG emissions than the fossil fuel they replaced: 
oilseed rape from the USA and Pakistani sugar cane have 
emissions 8% and 36% higher than diesel and petrol, 
respectively. These made a small proportion (0.4 to 1 .4%) 
of the biofuel supplied by Greenergy, Harvest, Mabanaft and 
Petroplus; however, 9% of Chevron's biofuel was sourced 
from US oilseed rape. 

All bar three companies (Lissan, Shell and Topaz) supplied 
biodiesel from palm oil. Disappointingly, only 0.5% of this 
was RSPO-certified palm. Other non-UK feedstocks do not 
have well established operational sustainability standards; 



although it is possible for suppliers to conduct their own 
independent field audits against the RTFO Meta-Standard. 
Greenergy are the only company to utilise this approach in 
the first year of the RTFO, through the application of the 
RTFO Meta-Standard to Brazilian sugar cane. An additional 
1 7% and 27% of their total biofuel met at least the Qualifying 
Environmental Level and Social Level, respectively, as a result 
of these independent audits. 

No suppliers reported any land-use change associated with 
the biofuel feedstocks they sourced; however, all suppliers 
reporting fuel from agricultural feedstocks reported that they 
did not know the previous land-use for a portion of their 
biofuel (Table 2.5). Notably the land-use was not known for 
over 90% of Esso's, Morgan Stanley's, and Topaz's 2 biofuel, 
and 73% of BP's 3 . Sourcing biofuel from land that was not 
previously cropland is likely to reduce carbon savings and 
could potentially cause a net overall increase in carbon 
emissions. 



Year One of the RTFO 



Renewable Fuels Agency 23 



Supplier 


Known 
land-use a 


Proportion meeting an 
environmental standard 


Proportion meeting a 
social standard 


Greenhouse 
gas saving 


Accuracy 
level, (0-5) 


Data 
capture 


RTFO 


QS 


Other/ 

none/ 

unknown 


RTFO 


QS 


Other/ 

none/ 

unknown 


(0 
Q. 

a 

3 
(0 

4> 

3 
«^ 
O 

m 


MPB Bioproducts 


100% 


100% 


0% 


0% 


0% 


0% 


100% 


36% 


2.0 


100% 


Muirhouse Farm 


100% 


100% 


0% 


0% 


0% 


0% 


100% 


36% 


2.0 


100% 


Pure Energy Fuels 


43% 


0% 


25% 


75% 


0% 


25% 


75% 


45% 


2.2 


67% 


Regenatec 


0% 


0% 


0% 


100% 


0% 


0% 


100% 


10% 


2.0 


50% 


Verdant 


100% 


70% 


0% 


30% 


0% 


0% 


100% 


67% 


5.0 


93% 


V-Fuels Blodiesel 


72% 


2% 


71% 


28% 


0% 


71% 


29% 


63% 


3.2 


79% 



a the only known land uses reported were 'by-product' and 'cropland 
Table 2.6: Biofuel supplier performance 



Supplier 


Greenhouse 
gas saving 


Accuracy 
level, (0-5) 


Supplier 


Greenhouse 
gas saving 


Accuracy 
level, (0-5) 


ABAKO 


85% 


2.5 


Green Fuels 


84% 


2.0 


Argent Energy 


85% 


5.0 


GreenerDiesel.com 


85% 


2.0 


Associated British Bio-Fuels 


85% 


3.0 


GreenFuel Supply Solutions 


63% 


3.0 


Biesel 


85% 


2.0 


Kassero Edible Oils 


85% 


2.0 


Bio UK Fuels (Sheffield) 


85% 


2.0 


Longma Clean Energy 


85% 


2.0 


Biofuel Refineries 


86% 


5.0 


MFS Fuel Supplies 


85% 


2.0 


Biomotive Fuels 


85% 


2.0 


Ozone Friendly Fuels 


85% 


2.6 


Celtic Biodiesel 


85% 


2.0 


Pilkington Oils 


85% 


3.0 


Convert2Green 


85% 


2.0 


PRS Environmental 


85% 


2.0 


Devon Biofuels 


85% 


2.0 


Pure Fuels 


85% 


2.0 


Doncaster Bio Fuels 


85% 


2.0 


Refuel Energy 


85% 


2.0 


Double Green 


85% 


4.3 


Rix Biodiesel 


85% 


2.0 


Ebony Solutions 


85% 


2.4 


Shepherds Bakery 


85% 


2.0 


Edible Oil Direct 


85% 


2.0 


Uptown Oil 


85% 


2.5 


Gasrec 


69% 


5.0 


Veg Oil Motoring 


99% 


2.0 


Goldenfuels 


85% 


2.0 


Wight Made Diesel 


85% 


2.0 



Many biofuel suppliers only use wastes and by-products as feedstocks. These fuels don't cause land-use change and automatically meet the Qualifying 
Standard for sustainability 

Table 2.7: Performance of biofuel-only suppliers using only by-products as feedstock 



GHG savings 



Environmental standard 



Data capture 














>. U3 


4- 




x 


03 




a> 


0) 


CC 





LU .2 


< 


(3 




n 


CO 




CD 


























■.:■■ 




iled to subn 

urvoi lied 


lit 




■■■■■':■ :i C'J 







failed to submit 



failed to submit 

unverified 



c 


CD 


ir 








< 


O 

t 

> 

C 

o 
O 

verified 





I unverified H > 1 0% from target < 10% from target at or above target — target 

Verified data 2008/09 obligation year 

Figure 2.9 a,b,c: Biofuel supplier performance against the Government targets 



24 Renewable Fuels Agency 



Year One of the RTFO 



Biofuel supplier performance 
Targets met 

The majority (89%) of the biofuel-only suppliers were 
reported as meeting all three of the Government targets, 
with all suppliers meeting the data capture target (Table 
2.6, 2.7). Of the six suppliers that were required to supply 
a verified Annual Report 4 to the RFA, three failed to do so 
- Double Green 2 , Ebony Solutions 2 and V-Fuels 2 . Argent, 
Convert2Green and Rix submitted a verified Annual Report 
as required. All six of these suppliers met the Government's 
targets (Figs. 2.9a,b,c). 

Four biofuel-only suppliers failed to meet the GHG savings 
target and/or the percentage of environmentally sustainable 
fuel target. Muirhouse Farm Partnership 1 and MPB 
Bioproducts 1 sourced UK oilseed rape for their biodiesel and 
reported using the RFA GHG default saving of 36%, thereby 
falling short of the 40% GHG savings target. All of this fuel met 
the RTFO Environmental Meta-Standard. Pure Energy 1 and 
Regenatec 1 sourced US and Brazilian soy (for which there 
is currently no operational sustainability standard) thereby 
failing to meet the target for percentage of fuel meeting a 
qualifying environmental standard. Regenatec additionally 
failed to meet the GHG savings target. 



Further details of the feedstocks and countries reported by 
individual suppliers are available in the Suppliers' Annual 
Reports to the RFA and in the full verified dataset for year 
one, published on the RFA website. 



Fuel type 


Feedstock 


Country 


Proportion 


Biodiesel 


Oilseed rape 


Ireland 


1% 


United Kingdom 


2% 


Soy 


Brazil 


0.2% 


United States 


0.4% 


Unknown 


9% 


Tallow 


United Kingdom 


0.2% 


United States 


0.1% 


UCO 


Ireland 


0.3% 


United Kingdom 


85% 


Bioethanol 


Cheese (by- 
product) 


Ireland 


0.01 % 


Biogas 


MSW 


United Kingdom 


2% 



Table 2.8: Biofuel-only suppliers' biofuel mix 



Where did the biofuel-only suppliers source their 
biofuels from? 

Thirty two of the 38 biofuel-only companies supplied only 
or mostly used cooking oil (UCO), which made up 85% of 
the biofuel supplied by these suppliers (Table 2.8). UCO is 
classified as a by-product and therefore automatically meets 
the Qualifying Standard Level for sustainability, as well as not 
causing direct or indirect land-use change. UCO additionally 
delivers high GHG savings. 

Argent, Biofuel Refineries 1 , Gasrec 1 and Verdant 1 reported 
GHG savings using actual fuel chain data for all of their 
biofuels. Double Green 2 used actual data for 76% of their 
fuel; no other suppliers reported actual fuel chain data. 



4 Suppliers of over 450,000 litres of biofuel per year are required to submit 
an Annual Report and verifier's opinion to the RFA. 



Year One of the RTFO 



Renewable Fuels Agency 25 



Supplier sustainability work 



Suppliers claiming over 450,000 RTFCs per annum must 
include in their carPon and sustainability Annual Reports 
an overview of their additional sustainability activities. The 
2008/09 reports, available from our website, were required to 
include the following items, where information was available. 

Fuel supplier information: 

• activities to improve the proportion of sustainably sourced 
feedstock and reduce average carbon intensity; 

• activities to support development of sustainability 
standards; 

• activities to promote feedstock production on idle land, 
and volume of such feedstock sourced; 

• activities to improve the accuracy of carbon data being 
used (defaults vs actual data); 

• environmental management system certificates; 

• successful prosecutions for breaches of compliance with 
any environmental or social regulations related to biofuels 
activities; 

• existing verified environmental or corporate responsibility 
reports. 

Information on other parties within the supply chain: 

• the percentage of their supply chain partner's total 
feedstock which meets respected sustainability standards; 

• environmental management system certificates held, 
e.g. ISO 14001; 

• successful prosecutions for breaches of compliance with 
any environmental and/or social regulations related to 
biofuels activities. 

Overall, the supplier reports do provide evidence of some 
engagement by the industry on sustainability. However, whilst 
some suppliers have been undertaking substantial activities 
to improve the sustainability of their biofuel, others did not 
demonstrate significant engagement. 



Some suppliers have introduced and implemented internal 
sustainability policies to apply when sourcing biofuels. 
These policies include criteria such as asking suppliers for 
assurance that production is not taking place in areas of high 
biodiversity or that child and forced labour is not being used 
on plantations. 

Various companies participate in initiatives like the Round Table 
on Responsible Soy (RTRS) or the Roundtable on Sustainable 
Biofuels (RSB) (see Development of sustainability standards, 
page 67), which aim to increase the supply and availability 
of certified sustainable biofuel feedstocks and provide 
internationally agreed frameworks for production. 



Roundtables 



There are several global organisations that bring together key 
stakeholders on both the production and purchasing sides of given 
commodity supply chains, e.g. producers, traders, governmental 
representatives, NGOs, academics and consultancies. These 
schemes aim to agree voluntary production standards that 
improve environmental and social outcomes of crop cultivation and 
processing. Roundtables may evolve to offer certification and chain 
of custody systems, once the underlying standards are agreed. 

Being a member of a roundtable does not necessarily imply 
that a supplier's feedstock has achieved certification under that 
scheme. Similarly, a supply chain partner could be a member of 
such a scheme, or even have achieved certification for part of 
its production, without certified feedstock having actually been 
purchased by the supplier in question. 

The four most prominent bodies are the Roundtable on Sustainable 
Palm Oil (RSPO), Round Table on Responsible Soy (RTRS), 
Better Sugarcane Initiative (BSI) and Roundtable on Sustainable 
Biofuels (RSB). 



Supplier-specific sustainability activities 

The suppliers are listed below according to the number of 
sustainability targets they met. 



In general, the commentary on sustainability activities 
provided by suppliers was poor, and in no case did a 
company report in detail all the information required by the 
RFA. For instance, no company except Shell reported any 
activity to promote feedstock production on idle land. Several 
suppliers provided little or no information in their submitted 
reports regarding relevant activities, or did not demonstrate a 
commitment to act on sustainability issues. We would hope 
to see significantly more detailed reporting on supplier's 
sustainability activities in their 2009/1 reports. 



Three targets met 

Argent Energy produces biodiesel using only tallow and 
used cooking oil, therefore 100% of its fuel meets the 
Qualifying Sustainability Standard. It intends to continue 
using only these feedstocks in subsequent years. Argent 
plans to improve the accuracy of carbon data being reported 
by using actual emissions data for its biodiesel fueled trucks. 
Argent did not report on whether it, or any of its suppliers, 
had been prosecuted for breaches of environmental or social 
regulations. 



26 Renewable Fuels Agency 



Year One of the RTFO 



'Whilst some suppliers have been undertaking substantial 

activities to improve the sustainability of their biofuel, others 

did not demonstrate significant engagement' 



ConocoPhillips provided details of principles underlying its 
environmental policy, but, in general, did not provide concrete 
examples of the application of these principles. It reported 
levels of investment in biofuels research, including advanced 
technologies. It reported the highest average accuracy level 
for its carbon data of any obligated company. Although 
it exceeded the target for fuel meeting an environmental 
standard, it is not a member of RSPO or other standards 
bodies. Its Humber refinery has an ISO 14001 certified 
environmental management system. It did not supply any 
sustainability information on supply chain partners. 

Convert2Green uses only UK sourced used cooking oil as 
a biofuel feedstock, and hence considers its operation fully 
sustainable. The company was able to report 100% of its 
biofuels meeting the Environmental and Social Sustainability 
Qualifying Standard. It has made changes to its production 
facility and distribution fleet during the obligation period that 
the company believes will increase the GHG savings of the 
biodiesel produced; however, details of reduced emissions 
have not, to date, been reported to the RFA. Convert2Green 
confirmed that it had not been prosecuted for breach of any 
environmental or social regulations in this obligation period. 

Greenergy is the only company in the first obligation period 
to have put in place a procedure to have its biofuel feedstocks 
audited against the RTFO Meta-Standard (see case study, 
page 29). It has undertaken a test case GHG analysis for one 
of its ethanol suppliers using real data (rather than relying on 
RFA defaults), which suggests improved GHG savings. It has 
used qualitative data from British Sugar to report a better 
than default saving for sugar beet ethanol. It has also aimed 
to increase GHG savings by maximising the use of wastes 
and by-products (37% of its biodiesel supply). Greenergy has 
begun a programme of work assessing GHG emissions from 
indirect land-use change. It is a member of four standards 
bodies (RSB, RSPO, RTRS, BSI). Greenergy was able to 
identify that at least 72% of its palm oil was produced on 
long term agricultural land, and is aiming to increase this to 
100%. It is sourcing from a supplier working towards RSPO 
certification, but has not to date reported using any certified 
palm oil. 

Mabanaft stated that although it has not reported any 
certified feedstock, several of its palm and soy suppliers are 
members of the RSPO and RTRS, respectively. It did not 
report that these suppliers have achieved certification to date. 
Mabanaft is not a member of any standards bodies. It met 
the Government's environmental sustainability target through 
the supply of biodiesel from UCO and tallow. Mabanaft has 



taken advantage of short supply chains (sourcing from UK 
production) to collect actual GHG emissions data. 

Rix sourced only UCO. It provided no information on 
additional sustainability activities. 

Two targets met 

Esso reported on investments in the development of 
advanced biofuels technologies. It provided information on 
several supply chain partners. One supplier has invested 
in data provision to meet RTFO requirements. Two are 
members of RSPO; of these two, one is also an RTRS 
member, and one has achieved RSPO certification for some 
of its palm oil. Work is underway with this last supplier to 
determine and report 'actual' GHG savings. Esso has not, 
however, reported the use of RSPO certified feedstock and 
is not itself a member of any standard body. Esso has a 
policy of reporting conservatively through the year, and was 
able to demonstrate small improvements in its sustainability 
data after verification. Esso has an ISO 14001 certified 
environmental management system. 

Harvest Energy is a member of the RSPO and has made 
term agreements for the future supply of RSPO verified 
material, though it has not reported any RSPO certified fuel 
to date. It is asking suppliers to join environmental schemes. 
It has sourced all of its sugar beet and over 1 0% of its oilseed 
rape from ACCS certified material. Harvest has used wastes 
and by-products as feedstock for 35% of its biodiesel. It 
achieved the highest GHG saving of any obligated company 
that submitted a verified Annual Report. Harvest has started 
to receive actual data from suppliers, and aims to increase 
use of 'accuracy level 3 and 4' (see Effects of the RTFO on 
greenhouse gas emissions, page 37) data in RTFO year two. 

Petroplus has improved its data reporting over the year 
through contact with its suppliers. Through the Northeast 
Biofuels 'Grower Network' it is involved in improving the 
carbon and sustainability of feedstocks grown in North East 
England. Although the majority of Petroplus' biofuel comes 
from soy and palm, it is not currently a member of RSPO or 
RTRS, stating that it is not yet convinced of the robustness 
of these mechanisms. Petroplus has developed a purchasing 
specification that includes demands on supplier supply chain 
monitoring. It did not provide information on supply chain 
partners or activity to improve carbon savings. 

Shell has a sustainable sourcing policy for suppliers, 
containing sustainability clauses for new and renewed term 
contracts. This demands assurance that high biodiversity 
areas have not been damaged, and that forced and child 



Year One of the RTFO 



Renewable Fuels Agency 27 



labour have not been used. Suppliers are also asked to join 
relevant standards bodies; however, to date, Shell has not 
reported any biofuel certified to a qualifying standard. Shell is 
a member of the RSB, RSPO, RTRS and BSI. It has planned 
independent audits of oilseed rape grown in Germany against 
the RTFO Meta-Standard. Further work includes research 
and development as well as involvement in a consortium 
focusing on identifying 'Responsible Cultivation Areas' 
(appropriate idle land) for future biofuels expansion. Shell did 
not report any activities to improve its carbon savings. 

One target met 

Chevron states that it is working through the International 
Petroleum Industry Environmental Conservation Association 
(IPIECA) to engage with the RSB and the European 
Petroleum Industry Association (EUROPIA), with the aim of 
improving chain of custody for certified sustainable crops. 
It is not a member of any standards bodies itself. Although 
Chevron reports that it asks its suppliers to source only 
sustainable palm oil, the company is not able to provide 
evidence through its chain of custody to demonstrate 
RSPO, or other, certified supply. Internationally, Chevron is 
involved in advanced biofuels research, including projects 
working on non-food cellulosic feedstocks. 

Total operates an ISO 14001 certified environmental 
management system. It provided no significant information 
on activities to support biofuel sustainability. 

No targets met 

Morgan Stanley (on whose behalf Ineos Refining reported) 
has developed a company sustainability standard for its 
suppliers. This demands that suppliers provide proof of 
country of origin, make assurance of no damage to high 
conservation value areas after 2005, no use of child labour, 
and no use of forced labour. It demands RSPO membership 
and evidence of progress towards full accreditation from palm 
suppliers as well as evidence of membership or application to 
join the RTRS from soy suppliers. However, Morgan Stanley 
is not a member of any standards bodies, nor has it reported 
any certified fuel. Verification revealed insufficient evidence 
to substantiate most sustainability information provided 
by suppliers to Morgan Stanley in year one. It intends to 
undertake an early verification of the first three months data 
from year two and work to improve supplier performance. 
It has an ISO 14001 certified environmental management 
system. 



Unverified 

BP 1 highlighted that its biofuels business is investing in 
development and commercialisation of advanced biofuel 
technologies. BP companies are members of the following 
sustainability assurance schemes: RTRS, RSPO, BSI and 
RSB. BP are also involved in a joint venture to build a wheat 
ethanol plant in the North East of England. BP did not supply 
any sustainability information on its supply chain partners. 

Murco reported purchasing from RSPO and RTRS members 
where possible. It provided no information on what percentage 
of fuel this represented, or any progress by these suppliers 
towards certification. They did not report certified biofuel in 
their report to the RFA. Some suppliers have reported that 
their South East Asian and South American supply chains 
are certified to ISO 14001 . Murco does not have a certified 
environmental management system. Murco did not provide 
details on any specific activities to improve carbon and 
sustainability performance. 

Topaz' Annual Report was received after the deadline, and 
even then contained no verifier's statement. It supplied no 
information on activities to support biofuel sustainability. 
It has committed to improve its reporting in the second 
reporting year. 



Who failed to report? 



A number of suppliers failed to submit an Annual Report and 
verification statement for 2008/09: 

• Double Green 

• Ebony Solutions 

• Prax 

• Topaz 3 

• V-Fuels Biodiesel b 

The RFA currently has no powers to take action against such 
failures. Verification is a requirement of the forthcoming Renewable 
Energy Directive and therefore this is one area of the RTFO that will 
need to be revised to achieve RED implementation. 

Companies supplying below 450,000 litres of fuel were not required 
to submit reports. 

a Topaz provided a report but failed to submit a verifier's opinion. 
b V-Fuels Biodiesel went into administration. 



1 BP supplied an Annual Report and a verifier's qualified opinion, which 
did not meet the RFA's verification requirements for limited assurance. A late 
revised report from BP provided limited assurance for a portion of their data. 



28 Renewable Fuels Agency 



Year One of the RTFO 



Case studies 

These three case studies reflect positive examples of companies supplying more sustainable biofuels in 2008/09: 




Biogas 

Gasrec supplies biomethane fuel under the RTFO. 
Biomethane produced by anaerobic digestion of organic 
landfill waste or manure is a good example of a sustainable 
biofuel. No land is required and the work presented later in 
this report {Indirect effects of using wastes, residues and 
by-products, page 59) identifies avoided emissions, giving 
biomethane from MSW a net carbon saving of over 100%. 




Pure plant oil 

Several relatively small biofuel companies supply pure plant 
oil (PPO) for converted vehicles. PPO does not need the 
additional processing step of transesterification, which is 
needed to produce biodiesel. This allows oilseed rape PPO 
to deliver a higher carbon saving than oilseed rape biodiesel, 
based on the RFA defaults. In Germany, several thousand 
heavy goods vehicles have been converted to operate on 
PPO. In the UK, usage is more limited, but converted vehicles 
are available. A technical fuel standard has been developed 
to ensure fuel quality. 




RTFO Meta-Standard 

In mid 2007, Greenergy began to develop criteria to apply the 
high-level principles of the RTFO Meta-Standard in a practical, 
locally appropriate, way to its purchases of bioethanol from 
Brazil. This approach, through independent field audit, was 
necessary as there is no standard currently in operation to 
demonstrate the sustainability of Brazilian bioethanol imports 
against the Meta-Standard. Greenergy's interpretation for 
Brazilian sugar cane was the first crop specific interpretation 
of the Meta-Standard to be approved by the RFA, and allows 
Greenergy to report sugar cane meeting the environmental 
and/or social criteria of the RTFO Qualifying Standard and 
Meta-Standard. 



Conclusion 

In general, suppliers are starting to rise to the challenge of 
tracing the sustainability of their fuels to meet their reporting 
obligations under the RTFO. Progress by feedstock 
standards such as the RSPO and BSI, and the involvement 
of suppliers in these initiatives, shows some reason for 
optimism. Initiatives such as Greenergy's and Shell's audits 
against the Meta-Standard have the capacity to positively 
affect agricultural practices. For instance, as a consequence 
of Greenergy's auditing a significant supply of sugar for 



consumption meets the Meta-Standard. Such initiatives 
could not exist without the RTFO reporting system. 

However, other suppliers have failed to show a commitment, 
and provided disappointingly little information regarding 
significant and relevant sustainability activities. Suppliers were 
asked to report on initiatives to improve the sustainability of 
feedstocks, including membership of feedstock sustainability 
standards. Unfortunately, only a few have supported these 
standards through proactive membership. 



Year One of the RTFO 



Renewable Fuels Agency 29 



The verification process 



Introduction 

Under the RTFO, where over 450,000 litres of biofuel per 
annum have been supplied by a supplier, the reliability of 
carbon and sustainability (C&S) information submitted to the 
RFA must be demonstrated through independent verification. 
The verifier's report must be submitted to the RFA alongside 
each supplier's Annual Report. The RFA does not currently 
provide a list of 'approved verifiers', but verifiers must be 
qualified to carry out audits against the International Standard 
on Assurance Engagements (ISAE 3000), which defines the 
requirements for limited scope engagements. 

Chain of Custody Level Possible audit activities 

Data collection I - Review of volume data 

and reporting - Review of records of C&S information 

- Review of mass balance system 



- Supplier pre-qualification and selection 
processes 

■ Contractual information provision requirements 

- Supplier audit activities 

- Quality review and documentation 
management 



- Review of C&S records held by suppliers 

- Review of suppliers' data controls around 
the provision of C&S information 

- Review of compliance with contractual 
sustainability information provisions 




Reporting party control 
environment 



Sup 



Supply chain control 
environment 



wrce of C&S infori 



- Review of C&S information collection 
processes 

- Physical inspection/interviews with producers 
and third parties 



Figure 2.10: Potential assurance activities in the chain of 
custody 

In addition to the guidance on verification available in the 
C&S Technical Guidance, the RFA engaged assurance 
experts Ernst & Young LLP in the summer of 2008 to 
produce detailed guidelines in response to requests for 
further clarification. These include issues such as the kind 
of evidence that should be obtained, potential assurance 
activities down the supply chain and testing procedures. One 
of the key principles of the RTFO system is that a verifier 
should be able to trace C&S claims back to the source of 
the data through the supply chain. For verification purposes, 
there needs to be a 'chain of custody' in place all the way 



down the supply chain where appropriate records are kept of 
material flows and C&S information. 1 

Context 

The RTFO reporting system is a world first for biofuels and 
places new challenges on the nascent supply chain linking 
agricultural production with transport fuel supply for the 
first time since horse-drawn carriages. The expectation has 
always been that it will take time to develop operational 
procedures that will enable suppliers to track information 
about sustainability through their supply chains. Part of the 
rationale for starting with a reporting system under the RTFO 
was to enable time for such procedures to develop and 
mature before mandatory C&S performance requirements 
were introduced. Nevertheless, it can be seen from the 
results below that some suppliers have engaged far more 
proactively than others in equipping themselves to meet the 
new challenges. 

Results 

Suppliers were required to produce their Annual Reports 
with verification statements in respect of their data for the 
2008/09 obligation period by 28 September 2009. The 
verification process, in many cases, resulted in changes to 
the first year's provisional dataset, reported in July 2009. 
This typically resulted from verifiers finding that insufficient 
evidence was available to support some of the claims that 
suppliers had made about their fuels. 

RTFO aggregate results 

At the aggregate level, the changes to performance from the 
provisional data set to the fully verified results against the 
Government's targets are detailed below. This indicates that 
the provisional results reported to the RFA during the year 
were broadly representative of actual performance. 

A small portion of the data from which these results are 
derived was not verified (5.7% of total biofuel volume). This 
is due to five suppliers failing to supply a verified Annual 
Report and two suppliers being unable to provide limited 
assurance for their reports. In addition, companies supplying 
less than 450,000 litres per annum are not required to submit 
a verified Annual Report. 

In calculating performance against the Government's targets, 
the C&S data of 5.4% of the total biofuel volume was changed 



1 The RFA also accepts certain 'Book & Claim' chain of custody schemes 
as demonstration of compliance with sustainability criteria. In this case, a 
supplier can purchase a certificate such as GreenPalm RSPO independently 
of the feedstock itself and report the fuel as meeting the RSPO standard. 



30 Renewable Fuels Agency 



Year One of the RTFO 



Annual supplier 
target 


Target 
08/09 


Provisional 


Verified 


Percentage 








of feedstock 








meeting a 
qualifying 


30% 


24% 


20% 


environmental 








standard 








Annual GHG 








saving of fuel 


40% 


47% 


46% 


supplied 








Data reporting on 








renewable fuel 


50% 


69% 


64% 


characteristics 









Table 2.9: RTFO aggregate results 

to 'unknown'. The C&S data of those suppliers who were not 
required to undergo verification has not Peen changed (0.3% 
of total Piofuel). 

The net result confirms that two of the Government's three 
targets have Peen met as per the provisional data. The 
proportion of fuel meeting environmental standards fell after 
verification from 24% to 20% - this was only two thirds of the 
Government's target. 

Other notaPle changes to the verified dataset included 
'unknown' previous land-use change rising from 36% to 42%, 
most of which was related to Piodiesel feedstocks. Changes 
to the reported country of origin included France rising 
from 1 to 3%, USA reducing from 31 % to 28%, and 'unknown' 
country of origin rising from 1 7% to 1 9% of Piofuel. 

Supplier results 

Changes to data due to the verification process were not 
evenly distriPuted Petween the suppliers. The performance 
of most companies improved slightly or did not change as 
a consequence of the verification process. NotaPle changes 
were the removal of some of the claims for fuel meeting 
sustainaPility standards from ConocoPhillips and Morgan 
Stanley; and changes of data to 'unknown' Py Morgan 
Stanley and Topaz (who supplied an Annual Report Put no 
verifier's opinion). This significantly affected Morgan Stanley's 
GHG savings performance through reporting the more 
conservative RFA high-level carPon defaults (Figs. 2.1 1a,b,c). 
Consequently, Morgan Stanley dropped from meeting two of 
the Government's targets to none. The primary reason for the 
data changes appears to be related to parties further up the 
supply chain being unable to provide sufficient evidence to 
support the sustainability claims they had provided. 



Number 

of 

targets 

met 


Fossil fuel 
company 


Verifier 


Number 
of targets 

met 

(unverified 

12 month 

report) 


Change 

from 

unverified 

report 


3 


Conoco 
Phillips 


Ernst & 
Young 


3 




Greenergy 


PWC 


3 


— 


Mabanaft 


SGS 


3 


— 


2 


Esso 


SGS 


1 


* 


Harvest 


SGS 


2 


— 


Petroplus 


SGS 


2 


— 


Shell 


Ernst & 
Young 


2 


— 


1 


Chevron 


SGS 


1 


— 


Total 


KPMG 


1 


— 





Morgan 
Stanley 3 


Ernst & 
Young 


2 


* 


■o 
o 

> 

c 

D 


Lissan 


Not verified 


3 


— 


Prax 


Not verified 


3 


— 


BP 


Not assured 

ERM 


2 


— 


Murco 


Not assured 6 
KPMG 


1 


— 


Topaz 


Not verified 


1 


* 



a In 2008/09 fuel previously reported in the name 'Ineos' was owned by 
Morgan Stanley at the duty point - making Morgan Stanley the legally 
obligated supplier, rather than Ineos itself. The RFA's monthly reports 
used the name 'Ineos' after consultation with the two suppliers. 

b Lissan was not required to provide a verifier's report as they reported 

less than 450,000 litres of biofuel. 

c Prax and Topaz failed to submit a verifier's opinion. 

d BP supplied an Annual Report and a verifier's qualified opinion, which 
did not meet the RFA's verification requirement for limited assurance. A 
late revised report from BP provided limited assurance for a portion of 
their data. 

e Murco supplied an Annual Report and a verifier's qualified opinion, 
which did not meet the RFA's verification requirement for limited 
assurance. 

Table 2.10: Effect of the verification process on supplier 

performance 



Year One of the RTFO 



Renewable Fuels Agency 31 



GHG savings 




pre -verification 
(as of Q4 
unverified RTFO 
report) 

post-verification 

unverified 

not required 
to verify 

target 



Verified data 2008/09 
obligation year 



Environmental standard 



100% 
90% 
80% 
70% 
60% 
50% 
40% 
30% 
20% 
10% 
0% 



failed to 

submit 



a. 

CD 



qualified 
opinion 



not 
required 
to verify 



1 



u 




CD CD 

CTc 



co o 



■ pre -verification 
(as of Q4 
unverified RTFO 
report) 

post-verification 

I unverified 

not required 
to verify 

— target 



Verified data 2008/09 
obligation year 



Data capture 




pre-verification 
(as of Q4 
unverified RTFO 
report) 

post-verification 
unverified 

not required 
to verify 
target 



verified 



Verified data 2008/09 
obligation year 



Figure 2.11 a,b,c: 
Fossil fuel supplier 
performance against 
the Government 
targets pre- and post- 
verification 



32 Renewable Fuels Agency 



Year One of the RTFO 



'In most cases, fuel suppliers have 

implemented adequate internal control procedures 

to track C&S characteristics within the company' 



Although Morgan Stanley's overall performance suffered as a 
result of the verification, it appears clear that a thorough audit 
was undertaken which should support improved procedures 
for information provision in the future. 

The reports for BP and Murco came with 'qualified statements' 
from their verifiers. Although in each case the verifiers did 
not find evidence to contradict the information the company 
had provided, they found insufficient evidence further up 
the supply chains to substantiate the C&S claims. Following 
further discussions with BP's verifier, limited assurance has 
been provided for one third of their C&S data. 

Verifiers' statements 

'Limited assurance' audits aim to provide moderate 
assurance that the Annual C&S Report is without material 
mis-statement. As such verifiers need to state that nothing 
has come to their attention to indicate material mis-statement, 
given an appropriate level of investigation. 

ISAE 3000 sets out the required content for assurance 
statements. These include: 

• The criteria against which the subject matter was 
evaluated; 

• A description of any inherent limitations, such as the 
extent of evidence gathering activities and where the work 
of third parties was relied upon; 

• A description of the assurance activities the verifier 
performed; 

• An assurance conclusion against the assurance criteria. 
The language used must be appropriate to either a limited 
or reasonable assurance engagement. 

It is standard practice for the verifier to submit a report, in 
addition to the opinion, to the client, which typically includes 
observations on the overall effectiveness of the system in 
place to generate the C&S data as well as recommendations 
for improvement. The RFA wrote to verifiers in September 
2009 to encourage the inclusion of observations from their 
work within their assurance statements for the RTFO reports, 
as a useful enhancement to the transparency of the RTFO 
reporting process. 

The RFA critically evaluated the verification statements 
against the ISAE 3000 criteria and identified concerns about 
a significant number of assurance statements provided by 
suppliers. The RFA sought clarification on the statements 
from the companies' verifiers. This resulted in some of the 



statements being revised to remove areas of ambiguity. 
Limited assurance was confirmed in most but not all cases. 
The majority of final assurance statements meet the ISAE 
3000 criteria well. 

In most cases it appears that fuel suppliers have implemented 
adequate internal control procedures to track C&S 
characteristics within the company. The major differences 
between the suppliers appeared to relate to the management 
and interaction with their supply chains and fuel purchasing 
policy. In some instances it was clear that reliance on the 
'spot-market', as opposed to developing relationships 
with individual suppliers, inhibited a company's ability to 
source fuels with known sustainability characteristics. A 
common feature of the verification statements was that 
companies needed to engage more closely with their supply 
chains, including the contractual elements, to improve their 
performance. 

Conclusions and implications for mandatory 
requirements 

Given that it was the first year of a new system, the verification 
process has gone relatively smoothly and better than many 
had anticipated. On the whole, verifiers appear to have fully 
understood the requirements of the scheme, and to have 
taken a consistent approach in conducting their audits. 

Areas of clear inconsistency relate mainly to the treatment 
of data that could not be assured. In most cases, verifiers 
required that such data was 'downgraded' to 'unknown', 
which enabled a positive verification for the remaining data 
(though this had a profound effect on the final results of 
Morgan Stanley in particular). In the case of BP and Murco, 
such data were not downgraded, and consequently limited 
assurance could not be provided for the entire dataset. 

Looking ahead, there are a number of issues with the current 
scheme that will need to be considered for the move to 
mandatory C&S requirements: 

• Is the level of assurance appropriate? 

• Is the timing of an end-of year verification process suitable? 

• How can verification be extended to include small suppliers 
in the least burdensome way? 

The RFA intends to hold discussions with verifiers and 
suppliers early in 2010 to discuss what can be learnt from 
the 2008/09 period. This could help inform the subsequent 
transition to mandatory requirements. 



Year One of the RTFO 



Renewable Fuels Agency 33 



Effectiveness of carbon and 
sustainability reporting 



Context 

Carbon and sustainability (C&S) reporting was introduced at 
the outset of the RTFO to enable measurement of the effects 
of the RTFO, and to encourage suppliers to source the most 
sustainable fuels. It was designed as a 'stepping stone' to 
mandatory C&S requirements. 

Better Regulation Executive study 

To assess the effectiveness of the reporting requirements, 
and to consider lessons learnt for future policy, the Better 
Regulation Executive (BRE) carried out an in depth study with 
the support of the RFA. 

Alongside desk research and an analysis of the RFA's quarterly 
reports (which detail progress towards the C&S targets), 
confidential interviews were carried out with a number of 
fossil fuel suppliers and other stakeholders. 

Results 

The study indicates that the reporting mechanism has had an 
effect on the behaviour of suppliers in terms of the collection 
of data regarding biofuel sustainability, but that it has been 
one of several factors having an influence on this. Reporting 
does appear to generate internal pressure within the industry 
to improve performance by facilitating comparisons between 
suppliers. Stakeholder interest in reporting, however, 
particularly from consumers, was not found to be sufficient 
to make them leverage their influence over suppliers. Other 
factors, in particular the future mandating of carbon and 
sustainability standards at UK and EU level as a result of the 
Renewable Energy and Fuel Quality Directives were found to 
be more dominant motivations for the apparent improvement 
in standards. 

The study found that suppliers have a commercial interest 
in developing the biofuels aspect of their businesses, 
because they provide one means for them to meet the 
energy challenge whilst building upon their core hydrocarbon 
business. As such, there is strong enthusiasm in the sector 
for the long term potential of biofuels, as demonstrated 
by research and development investment in advanced 
biofuels technologies (which offer the prospect of improved 
environmental sustainability). Some suppliers consider that 
this is a driver of improved environmental performance quite 
independent of the reporting mechanism. 

Considerable barriers to meeting the RTFO sustainability 
targets were highlighted by suppliers. These include the lack 
of certification schemes that meet RFA standards and the 
relative lack of power of the UK biofuels industry to influence 



behaviour in a diverse, global supply chain, particularly in the 
short time in which the RTFO has been in operation. 

The study also highlighted the difficulties faced by a UK 
regulator in trying to influence behaviour in a global industry 
and a global supply chain. As multi-national companies, the 
oil majors in particular are under financial pressure to take 
advantage of economies of scale by supplying the same 
products in multiple markets across Europe. The introduction 
of EU-wide standards is therefore likely to have much more 
power to impact on behaviour down the biofuels supply 
chain. The anticipation of their introduction is already a major 
driver of change. 

It is not clear to what extent the behaviour change inspired 
by the C&S reporting mechanism and forthcoming EU 
regulations has caused actual improvements in agricultural 
practices used in biofuel feedstock cultivation, as opposed 
to simply affecting data management processes used across 
the supply chain. For example, some suppliers and traders 
suggested that the use of certification schemes merely 
enabled them to prove that their product already meets the 
necessary standards. As a result, the study found a lack 
of evidence to demonstrate that this improvement in data 
collection translated into changes in agricultural practice that 
would improve the underlying sustainability of the biofuels. 

The full study is available available at 
www.renewablefuelsagency.gov.uk/yearone. 

Supplier reports 

The reports from suppliers provide some evidence of changes 
in behaviour beyond data collection. For example, both the 
Harvest and Greenergy reports cite avoiding certain biofuels 
with poor GHG performance under the RTFO guidelines. 
Harvest also state that it is working with some of its supply 
streams to demonstrate agricultural and processing practices 
which improve GHG performance. 

Two suppliers are implementing the RTFO Meta-Standard 
through auditing. Greenergy have conducted full audits at the 
plantation level and Shell is in the process of implementing 
a similar scheme. The Meta-Standard provides assurance 
that core sustainability principles including workers rights 
and biodiversity protection are adhered to. Such initiatives 
certainly have the capacity to affect agricultural practices on 
the ground and could not have happened in the absence of 
the RTFO reporting system. 

Although improving data provision through the supply chain 
does not automatically result in improved sustainability 



34 Renewable Fuels Agency 



Year One of the RTFO 



The reporting system provides a viable framework 
for mandatory performance requirements' 



performance, it is a necessary first step if suppliers are to 
exert influence on their supply chains. A numPer of the reports 
demonstrate steps suppliers are taking in this area. The Shell 
report for example sets out a three pronged strategy for 
improving sustainable sourcing covering internal governance, 
engaging with suppliers and influencing the wider industry to 
raise sustainability standards across the feedstock industry. 



Suppliers were asked to include information in their reports 
on initiatives to improve the sustainability of feedstocks, 
including membership of feedstock sustainability standards. 
Whilst some stated that they were considering joining, or 
encouraging their suppliers to, disappointingly few have 
supported these standards through membership thus far 
(Table 2.11). 



Fossil Fuel Supplier 


Sustainability standard 


RSB a 


RTRS 


RSPO 


BSI 


BP b 


V 


V 


V 


V 


Chevron 










ConocoPhillips 










Esso 










Greenergy 


yc 


V 


V 


V 


Harvest 






V 




Lissan 










Mabanaft 










Morgan Stanley 










Murco 










Petroplus 










Prax 










Shell d 


S 


V 


V 


V 


Topaz 










Total 











a The International Petroleum Industry Environmental Conservation 
Association (IPIECA), who represent the oil industry more widely, is a 
member of RSB. 

b BP Biofuels is a member of RSB & BSI, BP International is a member 
of RTRS & RSPO. 

c Greenergy has applied for membership, which is expected to be 
approved at the next Roundtable meeting. 

d Shell International participates in all these these sustainability 
standards rather than the obligated supplier Shell UK. 

Table 2.11: Fossil fuel supplier membership of standards 
bodies 



It is also notable that only one of the fossil suppliers, BP, 
supplied any RSPO certified feedstock during the 2008/09 
period despite certificates becoming available since the 
summer of 2008 1 . The surplus of RSPO certificates available 
would have been more than enough to cover all palm oil used 
for UK biodiesel in 2008/09. Ultimately the success of these 
schemes is contingent upon demand creating a premium for 
the end product on the market. 

Conclusion 

It is clearly difficult to identify and disentangle the effects of 
the RTFO reporting scheme on supplier behaviour from the 
various other drivers to improve C&S performance. There is 
good evidence, however, indicating that the nascent reporting 
system has made a positive contribution. Equally, it appears 
clear that reporting alone may be an insufficient measure to 
really transform the majority of the market, judging by the first 
year's experience. 

In recognition of the inherent limitations of reporting without 
minimum performance requirements, the other objective of 
the system was to provide a stepping stone to mandatory 
C&S requirements. This has clearly been met: whilst there 
have undoubtedly been challenges to overcome, the first 
year of reporting has demonstrated that suppliers can 
discriminate in their procurement policies; that they can 
track and trace C&S data through their supply chains; and 
that verifiers can substantiate this information. The reporting 
system has successfully demonstrated that it provides a 
viable framework for mandatory performance requirements. 
UK suppliers should therefore be relatively well positioned for 
the forthcoming RED implementation. 



1 BP reported some RSPO-certified palm, though their report was not 
assured by their verifier by the deadline. A late verifier's opinion provided 
limited assurance on the RSPO claim. 



Year One of the RTFO 



Renewable Fuels Agency 35 



Section 3 

Effects of the RTFO and the 
fuels supplied 




36 Renewable Fuels Agency 



Year One of the RTFO 



Effects of the RTFO on 
greenhouse gas emissions 



Carbon emissions 



Carbon savings delivered by the RTFO 

The main aim of the RTFO is to reduce carbon emissions 
from UK road transport. The RFA uses a lifecycle analysis 
(LCA) methodology that includes the carbon emissions from 
each step of the fuel chain. This also takes into account 
direct land-use change, where reported, although there is 
currently no carbon penalty for reporting 'unknown' previous 
land-use. It is therefore possible that not all direct land-use 
change emissions have been included. The lifecycle analysis 
does not include any indirect land-use change emissions, or 
other indirect emissions, which could be substantial (see box 
below). 

In the first year of the RTFO, based on our methodology, 
net C0 2 e savings of 1.6 million tonnes 1 were achieved by 
replacing 2.7% of road transport fuel with 1.3 billion litres 
of biofuels. So far, this is in line with the Department for 
Transport's anticipated carbon savings for the RTFO 2 . 



Indirect effects on carbon emissions 



When undertaking a lifecycle analysis of the greenhouse gas 
emissions from any system, it is necessary to draw boundaries 
to define what will be included (Fig 3.1). The RFA methodology 
does not currently include any indirect greenhouse gas emissions 
that might be caused by biofuels. Emissions arising from indirect 
land-use change (as identified in the Gallagher Review), for instance 
where existing production of food is displaced by biofuels demand 
onto forest land, are not included. Neither are emissions that arise 
when the use of wastes or by-products for biofuels diverts them 
from an existing function. There is currently no agreed methodology 
for calculating these effects (see Indirect effects of using wastes, 
residues and by-products, page 59). 



Where did the carbon savings come from? 

The average carbon savings of all the biofuels combined was 
46% relative to fossil fuel. This compares to a Government 
target for 40% carbon savings in 2008/09 and the 
Government's Regulatory Impact Assessment estimation of 
50% saving by 201 3 - 4 . 



Greenhouse gases - carbon, methane 
and nitrous oxide emissions 



There are a number of greenhouse gases (GHGs) that contribute 
to climate change. Some, such as methane and nitrous oxide are 
generally emitted into the atmosphere in lower quantities than 
carbon dioxide (C0 2 ) but have a more potent warming effect. 
In order to make useful comparisons between fuel chains with 
different emissions of the various GHGs we refer to 'equivalent 
carbon dioxide emissions' or C0 2 e, also referred to as 'carbon 
emissions'. Methane and nitrous oxide have a warming affect 
27 and 296 times more potent than carbon dioxide, respectively. 
Nitrous oxide emissions due to the production and application 
of nitrogen fertiliser for feedstock cultivation form a substantial 
fraction of the 'C0 2 e' emissions from many fuel chains (see N 2 
emissions from biofuel feedstock cultivation, page 44). 



At least 1 2 different feedstocks from at least 1 8 countries were 
used to deliver the carbon savings. The carbon savings can 
vary widely between feedstocks and the countries of origin, 
depending on the system of cultivation, the distance and 
type of transportation, and how the biofuel was processed. 
Ninety nine percent of the biofuels used in the UK under the 
RTFO delivered carbon savings; however, two feedstocks, 
oilseed rape from the USA and sugar cane from Pakistan, 
increased carbon emissions by 8% and 36%, relative to 
diesel and petrol 5 respectively. 

Some feedstocks used under the RTFO made greater 
contributions to the overall carbon savings than others 
depending on both the volume used and the carbon saving of 
that feedstock (Fig. 3.1 and Fig 3.2). For example, UCO made 
up 3% of the volume but delivered 6% of the carbon savings 
due to its high carbon saving relative to other feedstocks. 
Conversely, soy, which has lower carbon savings, made up 
over a third of the total biofuel volume, but delivered less than 
a quarter of the overall carbon savings. 



1 1 .6 million tonnes of C0 2 e is equivalent to 0.42 million tonnes of carbon. 

2 DfT estimated savings of approximately 2.6 to 3.0 million tonnes of C0 2 e 
per annum by 2010 based on a 5% biofuel volume target (or -2.5 billion 
litres of biofuels). This would be equivalent to 0.7 to 0.8 million tonnes of 
carbon. 

3 RTFO volume targets have since been revised downwards following the 
advice of the Gallagher Review and other evidence of the indirect effects of 
biofuels. 

4 Regulatory Impact Assessment for the RTFO, DfT (2007). 



5 Based on RFA defaults. 



Year One of the RTFO 



Renewable Fuels Agency 37 



Proportion of biofuel by feedstock 




'Other' includes 
cheese by-product 
municipal solid waste, 
molasses, sulphite & 
sunflower 



Volume of feedstock, litres 

Oilseed rape 324m | 25% 
I Palm 127m 1 10% 
I Soy 438m | 35% 
I Sugar beet 41m | 3% 
I Sugar cane 180m 1 14% 

Tallow 115m | 9% 
■ UCO 40m | 3% 

Unknown 13m 1 1% 
I Other 5m | <1 % 

Verified data 

2008/09 obligation year 



Figure 3.1: Biofuel by feedstock 

Contribution of each feedstock 
to the overall carbon savings 




'Other' includes 
cheese by-product, 
municipal solid waste, 
molasses, sulphite & sunflower 



Oilseed rape 24% 
I Palm 11% 

Soy 23% 
I Sugar beet 3% 
I Sugar cane 15% 

Tallow 1 7% 
I UCO 6% 

Unknown 1 % 

I Other <1% 

Verified data 

2008/09 obligation year 



Accuracy of the carbon saving results 
The RFA's approach to setting fuel chain carbon 
defaults 

The RFA set carbon emission defaults for over 200 fuel 
chains in the first year of the RTFO. The RFA defaults are 
set conservatively to encourage the supply of data (Fig 3.3). 
This means that fuel-level defaults (unknown feedstock and 
country) are generally more conservative than feedstock-level 
defaults (known feedstock, unknown country), and these are 
generally more conservative than feedstock/country-level 
defaults (known feedstock and country). Suppliers are able to 
edit the fuel chains and replace all, or part, of the chain with 
actual data from their supply chain where it is available. The 
RFA carbon defaults are also set to be more conservative 
than using actual data to calculate the fuel chain carbon 
emissions in most instances. 

Carbon reporting using default values 



Conservative 
defaults 




Somewhat 

conservative 

defaults 



Figure 3.2: Contribution of feedstocks to carbon savings 



Figure 3.3: Carbon reporting using default values 

Conservative versus typical carbon defaults within the 
RFA fuel chains 

Within the RFA fuel chains there is a default carbon emission 
assigned to each step: all of the energy inputs and outputs of 
each stage in the chain are taken into account and converted 
to a carbon emission factor. For example, at the cultivation 
stage, the RFA has set defaults for the fertiliser and pesticide 
input, the crop yield, the fuel used on the farm, and nitrous 
oxide emissions from the soil. Some of these carbon defaults 
are based on typical emissions for that step in the biofuel 
process whilst others are set more conservatively. 



38 Renewable Fuels Agency 



Year One of the RTFO 



Conservative default values within the fuel chain have been 
applied to activities that occur in the biofuel conversion 
phase or downstream, where it is likely that biofuel suppliers 
would have most influence over the type of practice, and 
data collection. This means that the data underlying a large 
share of the total fuel chain emissions (e.g. farming, transport, 
oilseed crushing etc) is based on a 'typical' case rather than 
a 'conservative' case. 

Conservative defaults are based on the 'worst common' 
practice; that is, the worst practice that occurs with 
reasonable frequency. This is to encourage the provision of 
more accurate information whilst still ensuring that the carbon 
savings are broadly representative of actual performance. 

The variation between conservative and typical defaults for 
steps in the fuel chain is generally between 1 and 20% for 
a particular input. Although this is significant for the input by 
itself, the effect on the overall carbon saving of the fuel chain 
is generally small. 

There are single process steps where different practices can 
have a substantial impact on the overall fuel chain, such as 
the difference between using biomass and coal to provide 
process heat. These are typical practices at the process step 
of the fuel chain for sugar cane bioethanol from Brazil and 
Pakistan, respectively. As a consequence, whilst Brazilian 
sugar cane ethanol has a 71% default saving, sugar cane 
ethanol from Pakistan can result in a 36% increase in 
emissions relative to petrol. 

Accuracy Level of data 

The Accuracy Level' of the biofuel carbon emissions reported 
by suppliers reflects the type of data used to determine the 
carbon emissions. The majority (70%) of the biofuels reported 
to the RFA used the RFA default carbon numbers (Fig. 3.4). 
A portion of the RFA fuel chain defaults were replaced with 
industry data for a quarter of the biofuels supplied. Four 
percent of the biofuels were reported using actual data to 
determine the carbon emissions for part, or all, of the fuel 
chain. 

Most of the feedstocks reported using actual data (Accuracy 
Level 5) delivered better carbon savings than the RFA fuel 
chain defaults (Table 3.1). However, in general, editing the 
RFA defaults within the fuel chain or replacing with industry 
data did not significantly affect the carbon savings. UK sugar 
beet was an exception where there was a significant saving. 
Anecdotally, we have been informed through conversations 
with suppliers that the transport distance has been the most 



Proportion of data at each 
Accuracy Level (0-5) 
(by volume of biofuel) 




Level 0: RFA default 
unknown feedstock 
and country 1 % 

Level 1 : RFA default 
known feedstock 
or country 1 8% 

Level 2: RFA default 
known feedstock 
and country 52% 

Level 3: edited RFA defaults 
within the fuel chain 1 % 

Level 4: used industry 
data 24% 

Level 5: used real data 4% 



Verified data 2008/09 obligation year 

Figure 3.4: Accuracy Level 

common RFA default to be edited or replaced with industry 
data. This would not be expected to influence the carbon 
savings substantially. To achieve more significant changes 
in reportable carbon savings, data should be collected and 
passed up the supply chain from the feedstock cultivation 
stage and/or processing step, for instance on chemical 
inputs and energy used to operate the plant. It is therefore 
important to have an effective and verifiable chain of custody 
in place to claim carbon savings that differ from the RFA 
defaults. 

The use of actual data to improve carbon savings, and actions 
to reduce process emissions, could be further encouraged 
by a scheme that rewards carbon savings. 

Potential carbon emissions from unknown 
feedstocks, countries and previous land-use 

A number of suppliers were unable to determine the 
feedstock or country from which some of their biofuel was 
sourced: 1% of the feedstock and 19% of the country of 
origin was reported as unknown. To determine the potential 
carbon savings delivered by these unknowns an analysis 
was undertaken to determine their carbon savings under 
'best', 'typical', and 'worst case' scenarios. An estimate of 
the effects of these different scenarios on the RTFO carbon 
savings as a whole was then calculated. The analysis did not 
assume any land-use change, either direct or indirect. 



Year One of the RTFO 



Renewable Fuels Agency 39 



The use of actual data could be further encouraged 
by a scheme that rewards carbon savings' 



Fuel Type 


Feedstock 


Country of 
origin 


Reported carbon saving 


RFA default 
GHG saving 


Accuracy Level 3: 
changed RFA default 
within the fuel chain 


Accuracy Level 4: 
used industry default 
within the fuel chain 


Accuracy Level 5: 

used actual data 

within the fuel chain 


Biodiesel 


Oilseed rape 


France 






50% 


47% 


Germany 


46% 




48% 


44% 


Ireland 






54% 


36% 


UK 


36% 




40% 


36% 


Palm 


Malaysia 




45% 




46% 


Soy 


United States 


33% 


31% 




33% 


Tallow 


Denmark 




84% 




84% 


UK 






85% 


85% 


USA 


80% 


80% 




80% 


UCO 


Ireland 






85% 


85% 


UK 


84% 


85% 


85% 


85% 


Bioethanol 


Sugar beet 


UK 




71% 




41% 


Sugar cane 


Brazil 




71% 


81% 


71% 


Biogas 


MSW 


UK 






69% 


58% 


Grand Total 


62% 


60% 


61% 





| | Carbon savings better than RFA default | | No difference | | Worse than RFA default 

Table 3.1: Feedstocks with carbon savings reported using information in addition to RFA fuel chain defaults 



The 'best case' and 'worst case' scenarios assume that 
where the feedstock or country could not be determined, 
the biofuel was sourced from a feedstock or country that 
delivered the highest or lowest carbon savings, respectively. 
The selection of best and worst examples was from 
feedstocks and countries that had been reported to the RFA 
in 2008/09. Additionally, the feedstock allocation was to the 
best/worst feedstock within that fuel type, and similarly, the 
country allocation was to the best/worst country of origin 
reported for that feedstock. 

For the 'typical case' scenario the biofuels reported from 
unknown feedstocks and countries were allocated to 
feedstocks/countries of origin in proportion to the known 
data. 



Therefore, it seems likely that had the feedstock and country 
of origin been determined for all of the biofuels reported 
under the RTFO the reported carbon savings would have 
been higher. 

However, the previous land-use was not determined for 42% 
of the biofuels used in the UK. In all cases where previous 
land-use was reported, it was 'cropland' in November 2005 
- no conversion of grassland or forestland was reported. 
Nonetheless, the large proportion of unknown previous 
land-use is of concern. If even a small proportion of this was 
carbon rich grassland or forestland, it could have substantially 
reduced the carbon savings resulting from the RTFO as a 
whole, or even resulted in a net release of carbon. 



In the 'worst case' scenario, the carbon savings would be 
reduced from a reported 46% to 43%. However, the typical 
and best case scenarios would increase the reported carbon 
savings from 46% to 48% and 50% respectively (Table 3.2). 



40 Renewable Fuels Agency 



Year One of the RTFO 



Reported carbon 
savings 

'Best case' 
carbon savings 



C0 2 e saved, Carbon 

million tonnes saving 

1 .56 46% 

1.71 50% 



Change from 

reported 

carbon savings 

not applicable 
+4% 



'Typical case' 
carbon savings 



1.64 



48% 



+2% 



'Worst case' 
carbon savings 



1.46 



43% 



-3% 



Table 3.2: Potential carbon savings of biofuels delivered 
under the RTFO based on scenarios for the source of 
biofuels from unknown feedstocks and/or countries 

Carbon savings under the Renewable Energy 
Directive 

The RED has its own LCA methodology, and there are 
carbon defaults for a number of different feedstocks, listed in 
the Directive. The LCA GHG methodology for calculating the 
RED carbon defaults differs from the RTFO methodology in a 
number of ways, as described on page 43. Additionally, some 
of the emission and conversion factors used to calculate 
individual steps within the feedstock fuel chains differ. As a 
consequence, the feedstock carbon defaults under the RED 
are different from those under the RTFO; although most are 
within a few percent of each other. 

The RED contains two types of values for lifecycle carbon 
emissions - 'typical' and 'default'. The typical values are 
the sum of the emissions from each process stage of 
biofuel production. The higher default emissions are made 
conservative by taking the typical value and adding 40% to 
the greenhouse gas emission from what the Directive defines 
as the 'processing' stage. 

The carbon saving that would have been reported for fuel 
supplied in 2008/09 had the RED carbon defaults 6 been 
used is similar to that reported using the RTFO methodology. 
The analysis indicates that the total emissions reductions 
calculated using the RED and RTFO methodologies would 
be 1 .64 and 1 .56 million tonnes of C0 2 e, respectively. 

It is worth noting that the feedstock was not known for 
one percent of the biofuels reported under the RTFO, so this 

6 For the carbon savings analysis, the reported emissions for each 
feedstock were replaced with RED defaults (where available) which are more 
conservative than the 'typical' RED GHG emissions also listed in Annex IV 
of the Directive. 



Fuel 
Type 


Feedstock 


Proportion of 
total biofuel 


Carbon saving 3 


RED 


RTFO 


V) 

<u 
'■5 
o 

m 


Oilseed rape 


25% 


38% 


40% 


Palm 


10% 


19% 


45% 


Soy 


34% 


31% 


28% 


Sunflower 


0.2% 


51% 


26% 


Tallow 


9% 


83% 


81% 


UCO 


3% 


83% 


85% 


Unknown 


1% 


n/a 


36% 


o 

c 

CD 

.C 

CD 
O 

m 


Cheese 
(by-product) 


0.0% 


n/a 


28% 


Molasses 


0.1% 


71 % b 


53% 


Sugar beet 


3% 


52% 


71% 


Sugar cane 


14% 


71% 


71% 


Sulphite 


0.1% 


n/a 


93% 


Unknown 


0.1% 


n/a 


28% 


Biogas 


MSW 


0.0% 


73% 


69% 



Feedstocks that do not meet the RED 35% GHG saving 



threshold 

a The RTFO GHG savings are based on the average GHG savings for 
each feedstock reported for the first year of the RTFO. The RFA has 
country -specific fuel chain GHG defaults for each feedstock, but the 
RED defaults are set for each feedstock only, and are not affected by 
the country in which the feedstock was grown. 

b The GHG saving of molasses is not listed in the RED so the GHG 
saving of sugar cane was used. 

n/a not applicable or RED default not available. 

Table 3.3: RED versus RTFO carbon savings for feedstocks 
reported under the first year of the RTFO 



biofuel would not be eligible under the RED. In addition, the 
RED default carbon savings for two key feedstocks - palm 
and soy - do not meet the RED's 35% minimum GHG saving 
threshold. Soy and palm together accounted for 44% of the 
total biofuel volume in 2008/09 (Table 3.3). 

In order for suppliers to report palm under the RED they 
will need to either: demonstrate that their process includes 
capture of methane at the oil mill (default GHG saving of 56%); 
or use actual data to report an improved carbon saving; or 
demonstrate that palm had been grown on 'degraded land', 
which would make it eligible for a 29 gC0 2 e/MJ GHG 'bonus'. 



Year One of the RTFO 



Renewable Fuels Agency 41 



The previous land-use was unknown for 43% of the biodiesel 

and 36% of the bioethanol' 



In orderto report soy, biofuel suppliers will need to demonstrate 
that their biofuel meets the GHG saving threshold through 
collection of actual data for some or all of the fuel chain steps, 
or demonstrate that it was grown on 'degraded land' for a 
29 gC0 2 e/MJ GHG 'bonus'. For example, to report an 
improved saving using actual data a supplier could source 
from a farm that minimised fertiliser input whilst maintaining 
or increasing yields relative to the defaults. 

Suppliers will also need to be able to demonstrate the 
previous use of the land on which the feedstock was grown 
in order for their biofuels to qualify under the RED. For the 
first year of the RTFO the previous land-use was unknown for 
43% of the biodiesel and 36% of the bioethanol. 

RFA life cycle analysis methodology 

Companies supplying biofuels under the RTFO are required 
to report the carbon emissions. The carbon emissions of 
biofuels are determined on a life cycle basis from 'field to 
wheel', and compared to the emissions from fossil fuels in 
order to determine the saving achieved. The boundaries 
of the life cycle analysis (LCA) start with cultivation of the 
feedstock and end at the UK duty point (Fig. 3.5). It therefore 
includes carbon emissions from all the steps along the fuel 



chain in between, such as feedstock transport, drying and 
storage of the feedstock crop, conversion of the feedstock 
to biofuel, and transport to the UK duty point. The major 
sources of carbon emissions from each step in the fuel chain 
are listed in Table 3.4. 

The life cycle analysis methodology also takes into account 
any land-use change. Conversion of non-cropland habitats, 
such as grassland or forest will release both carbon stored 
in the biomass and the soil, for example through ploughing. 
However, no carbon penalty is applied where the previous 
land-use was not reported (accounting for 42% of the 
biofuels in the first year of the RTFO). Indirect land-use 
change - where biofuel feedstocks have displaced crops (or 
other previous uses of the land) to a new area, potentially 
causing habitat destruction and releasing stored carbon - is 
currently outside the LCA boundaries. The RFA has recently 
undertaken work to develop a methodology and case studies 
that illustrate how indirect land-use change can be avoided 
(see Avoiding indirect land-use change, page 62). 

Similarly the indirect effects of wastes and by-products, such 
as municipal solid waste (MSW) or tallow, are not accounted 
for. For example, using MSW for biogas avoids emissions 



Boundaries of carbon intensity calculation 



Indirect 
land use 
change 



Previous land 
use 



t 



Boundary for monthly carbon intensity calculation 



Cultivation and 
harvest 



Waste material ' 



Feedstock 
transport 



Biofuel 
production 



Biofuel transport -*■ Biofuel use 



o 

>* CO 



CD p 

%2 



Excludes minor sources from: 

• Seed for biofuel crops 

• Manufacture of machinery 
or equipment 

• Chemicals used for biofuel 
conversion (less than 1 % of total 
emissions) PFCs, HFCs, SF6 



Product(s) substitution 
by biofuel product 



Assessed 
separately 



Fossil fuel 
reference system 



Indirect effects 
of wastes 



Figure 3.5: Boundaries of the RFA's carbon emission calculation for biofuels 



42 Renewable Fuels Agency 



Year One of the RTFO 



Step in the fuel chain 


Major influences on carbon emissions 




- Crop yield 




- Emissions from land-use 


Crop production 


- N 2 emissions from soil 

- Fertiliser manufacture 




- Pesticide manufacture 




- On farm fuel use 




- Fuel (e.g. diesel, fuel oil, natural gas, 


Drying and storage 


coal) 




- Electricity 




- Yields 




- Fuel (e.g. natural gas, fuel oil, coal) 


Conversion 


- Electricity 

- Chemicals 




- Co-products (impact can be positive or 
negative) 


Feedstock transport 


- Diesel or other fuel for transport 


Liquid or gaseous fuel 
transport and storage 


- Diesel/gas or other fuel 



compared to the value of the biofuel, hence reducing the 
carbon emissions attributed to the biofuel. For example, this 
approach is used for glycerine, which is a co-product of the 
biodiesel transesterification. 

RED lifecycle analysis methodology 

The LCA methodology in the RED is broadly similar to that of 
the RTFO. The main difference is that the carbon emissions 
from most co-products are accounted for by using the 
'allocation by energy content' method (with exceptions for 
some wastes and residues). This approach allocates carbon 
emissions to the fuel and co-products in proportion to their 
energy content. Excess electricity from co-generation is 
allocated by (a restricted) system expansion method. 

The life cycle carbon emissions under both the RTFO and 
RED methodology are allocated to the biofuel per unit of 
energy (C0 2 e/MJ of fuel). 



Table 3.4: Most important sources of carbon emissions in a 
typical biofuel fuel chain 

of methane from decomposition of waste, resulting in 
lower GHG emissions from both road transport and landfill. 
Conversely, diverting tallow to biodiesel use can cause the 
other end-users to replace it with more carbon intensive 
feedstocks such as palm or heavy fuel oil, resulting in higher 
carbon emissions. For further information on the indirect 
effects of wastes and by products, including case studies 
on tallow, MSW, straw, and molasses (see Indirect effects of 
using wastes, residues and by-products, page 59). 

It is important to consider indirect effects when assessing 
whether the biofuel has, across the whole system, reduced 
emissions of GHGs relative to fossil fuels. 

Co-products 

Most of the biofuel fuel chains also result in the production 
of co-products, such as, animal feeds, chemicals, electricity, 
and heat. Co-products are treated, where possible, through 
the 'system expansion' method. This means that the carbon 
emissions of the biofuel include any increased, or avoided, 
carbon emissions due to an increased supply of a co-product. 
For example, rape meal, a co-product of biodiesel production 
from oilseed rape, substitutes for soy meal as an animal 
feed. Where the data required to identify which product is 
substituted and the associated emissions is not available, the 
co-product is accounted for using the 'allocation by market 
value' approach. This allocates a fraction of the fuel chain 
carbon emissions to the co-product, in proportion to its value 



Year One of the RTFO 



Renewable Fuels Agency 43 



N 2 emissions from biofuel feedstock cultivation 



The manufacture of nitrogen (N) fertilisers and direct emissions 
from cultivated soils are the two main sources of nitrous 
oxide (N 2 0) emissions from biofuel production. The volume of 
these emissions is relatively small, but since N 2 has a global 
warming potential that is 300 times that of C0 2 , they can 
form a significant part of the total lifecycle emissions for some 
feedstocks. Based on default values from the RFA's Technical 
Guidance, N 2 accounts for 85% of emissions from oilseed 
rape biodiesel and 65% of emissions from wheat bioethanol. 

Considerable uncertainties affect the evaluation of these 
N 2 emissions, especially those from cultivated soils. The 
Intergovernmental Panel on Climate Change (IPCC) assumes 
a linear relationship between soil N 2 emissions and N 
fertiliser application. This approach, which was developed 
mainly for the preparation of national GHG emissions 
inventories, has been adopted widely in GHG emission 
calculations for biofuels carbon and sustainability reporting. 
The uncertainties in emissions are reflected by the IPCC in 
relatively large ranges associated with the factor determining 
the linear relationship. 

Modelling approaches such as the DeNitrification 
Decomposition (DNDC) model are now favoured as a 
more sophisticated and reliable means of evaluating N 2 
emissions from soil, and have been developed for application 
with all types of cultivation. However, to be used in practical 
applications these models require validation and calibration 
through extensive field measurements, over a number of 
seasons. This research has commenced in the United 
Kingdom and suitable results are expected to become 
available up to the planned end date in 201 4. 

The existing default values for emissions from fertiliser 
manufacture are based on relatively old data. Future carbon 
and sustainability reporting could be made more accurate 
by including current and future reductions in the total 
GHG emissions associated with N fertiliser manufacture in 
calculations. 



through evolving land management schemes, and supported 
by relevant GHG emissions tools and calculators. 

Looking forward, there is an opportunity to improve data 
reporting from UK cultivation through the preparation of 
(initially preliminary and subsequently refined) UK regional 
maps of the variation of soil N 2 emissions with N fertiliser 
application rates for relevant arable crops, based on the 
suitably validated and calibrated UK-DNDC model. Achieving 
this improved accuracy in reporting for non-UK crops would 
require regular review of similar mapping exercises in major 
biomass feedstock producing and biofuel exporting countries. 
Defining best practice and reducing N 2 emissions globally 
will require international research on mitigation options and 
international co-operation on all these matters. 

The full study is available available at 
www.renewablefuelsagency.gov.uk/yearone. 





Numerous options have been suggested for mitigating N 2 
emissions associated with cultivation. These include the 
application of different types of N fertilisers, the timing and 
management of N fertiliser applications, the optimisation of 
N fertilisation for total GHG emission minimisation, and the 
utilisation of different cultivation techniques, such as zero- 
and minimum-tillage. However, at this stage the evidence for 
the efficacy of these measures is not conclusive. The benefits 
require comprehensive quantification before clear guidance 
for practical use by farmers can be promoted, possibly 



44 Renewable Fuels Agency 



Year One of the RTFO 



Effects of the RTFO in the UK 



Impacts of the RTFO on UK business 



An assessment of the impacts on UK business of the first year 
of operation of the RTFO was carried out between September 
and November 2009. The assessment considered the impact 
of the RTFO on businesses in the UK and the bearing of a 
number of unforeseen issues during this period, specifically: 

• The discrepancy in the RTFO; 

• The US subsidy and the related 'splash and dash'; 

• The Gallagher Review and the consequent Department for 
Transport revision to UK biofuels targets. 

The assessment included a market review, a literature review 
and an extensive consultation process with over 50 key 
stakeholders (including obligated suppliers, biofuel producers 
and suppliers, vehicle manufacturers, fleet operators and 
agricultural industries). 

The study findings supported the conclusion that the 
introduction of the RTFO created a new market for the use 
of biofuels in the UK, increasing supply from less than 1% 
of road transport fuels in 2007/08 to 2.7% in 2008/09 (the 
first year of operation). Increased supply was overwhelmingly 
achieved through imported feedstock (just 9% of feedstock 
was sourced domestically). This was due to a number of 
factors, including that imported supplies were generally 
cheaper (in part because of subsidies, particularly in the US). 

Impacts of the RTFO on obligated suppliers 

Evidence from fuel suppliers suggests that the original capital 
costs estimated in the Regulatory Impact Assessment (RIA) 
were overstated, being as much as twice the actual capital 
costs incurred. However, the situation is not straightforward, 
which makes it difficult to make an overall assessment: some 
costs have been deferred; some were spent prior to the 
RTFO (as an economic investment); and additional costs e.g. 
in transfer lines and control equipment were identified. The 
administrative costs of the RTFO were broadly in line with 
estimates in the RIA. 

Comparison of biofuel and oil prices during 2008/09 
indicates that with the 20p per litre fuel duty incentive for 
biofuels, biofuel was generally cheaper to supply than fossil 
fuel and suppliers reduced their total costs by up to £107 
million (biodiesel £58m, bioethanol £49m). This saving may 
have been reduced by other costs arising from supplying 
biofuels, and a proportion may have been passed onto 
the consumer in lower petrol prices. However, there is no 
evidence to demonstrate this. The duty incentive is due to 
end for liquid biofuels (with the exception of biodiesel made 
from used cooking oil) from April 2010. 



Impacts of the RTFO on UK biofuel 
producers 

Although the primary objective of the RTFO is to achieve 
carbon savings, it was anticipated that the introduction of 
a long term market based obligation would stimulate UK 
production alongside imported biofuels. 

Stakeholders identified the structured framework the RTFO 
provides as a key benefit which provided confidence to 
biofuel producers - a number of businesses identified that 
the RTFO was the reason why they existed. 

Whilst the RTFO created a long term regulatory framework 
and successfully stimulated the intended overall level of 
biofuels supply, the benefits to UK producers were more 
limited than many anticipated. Planned UK capacity had 
been in line with UK targets, but this capacity has not been 
realised. Factors negatively affecting UK production included 
cheaper imports, in particular US subsidised soy biodiesel 
which undermined UK (and wider EU) competiveness; the 
RTFO drafting discrepancy; and the reduction in RTFO 
targets following the Gallagher Review recommendations 
which undermined investor confidence (addressed in more 
detail below). 

The administrative costs of the RTFO were not large for most 
businesses, although small biofuel producers were affected 
proportionally more. 

Impacts of the RTFO on small-scale UK 
biofuel suppliers 

Many stakeholders reported that the RTF certificate trading 
system was less well suited to the needs of smaller suppliers 
than the existing duty incentive. This was due both to 
the administrative burden of reporting to the RFA and the 
time lag between supplying fuel and deriving benefit from 
RTFCs. Small suppliers using used cooking oil as a feedstock 
will benefit from a two year extension to the duty incentive. 

Impacts of the RTFO on the agricultural 
sector 

UK agricultural suppliers and traders have benefited from the 
introduction of the RTFO, with five percent of biofuel sourced 
from UK crops. However, biofuels remain a relatively small 
market for agricultural suppliers using just four percent 1 of 
total UK oilseed rape production, and eight percent 1 of UK 
sugar beet, with no wheat or cereals being reported. The 
potential benefits of the RTFO for UK agriculture are therefore 

1 Note that these figures are estimates by area farmed, and refer only to 
feedstock grown and used for biofuels in the UK. 



Year One of the RTFO 



Renewable Fuels Agency 45 



not yet being fully realised. Looking forward however, new 
developments such as the opening of the Ensus plant on 
Teeside, which is set to be the world's largest wheat-fed 
bioethanol refinery, indicate a more significant effect in the 
very near term. 

Impacts of the RTFO on other sectors 

Overall, fleet operators reported no major issues arising from 
the increase in biofuel supply. Concern was raised about two 
issues: 

• Fuel quality: some biodiesel blends were of variable quality 
and in some cases a reduction in efficiency was reported 
when using biofuels (although these were isolated 
incidences specific to a small number of operators); 

• Fuel technical issues: mainly concerning reports of a 
required increase in the frequency of tuning engines, 
cleaning out tanks and replacing parts. 

An episode in which jet fuel may have been contaminated by 
road transport biofuels was identified anecdotally. Fuel quality 
checks at the airport in question identified an off-specification 
fuel batch, which may have been due to contamination with 
biodiesel in a fuel pipeline. Changes in operating procedures 
for pipelines supplying both aviation and road transport fuels 
should minimise the risk of such an incident occurring in 
future. 

Impacts of the discrepancy 

The RTFO Order (2007) was drafted in a way that inadvertently 
excluded from the obligation any fossil fuel blended with 
biofuel before the duty point. As a result obligated suppliers 
were only legally required to supply about half the intended 
volume of biofuel in 2008/09. The effects of this on business 
were mixed. It benefited those yet to deliver their obligation 
(in terms of development of infrastructure or accumulation 
of certificates), but had a negative impact on those who had 
invested in blending ahead of the RTFO. In addition: 

• Obligated suppliers will benefit from the ability to carry 
forward Renewable Transport Fuel Certificates into 
2009/10, and will potentially be able to reduce costs after 
the revocation of the duty-incentive by using certificates 
from the previous period. 

• Some obligated suppliers met their targets without the need 
to purchase certificates from the market as they intended. 

• The discrepancy is reported to have caused a reduction in 
certificate value from around eight pence per litre to zero. 



For a small number of obligated suppliers that were over- 
delivering their target (with the intention of selling RTFCs), 
this is reported to have resulted in a loss some businesses 
valued at over one million pounds. 

• Small biofuel suppliers who may have anticipated benefits 
from RTFCs were similarly affected by the collapse in the 
RTFC market. 

Market information indicates that the duty incentive alone 
was sufficient to meet the additional cost of biofuels for much 
of the first year of the RTFO. It should be noted, however, that 
obligated suppliers were benefiting from supplying biofuels at 
a lower cost than fossil fuel due to the duty incentive. This 
helped ensure that the original 2.5% volume supply target 
was exceeded, even though the discrepancy in the RTFO 
resulted in the legal obligation being reduced to 1 .15%. This 
indicates that deriving additional value from RTFCs was not 
necessary for the majority of biofuels supplied into the UK 
market with the duty incentive in place. 

The impacts of the discrepancy are likely to carry-over into 
the 2009/1 obligation period because suppliers are allowed 
to meet 25% of their obligation each year with certificates 
issued in the previous period. Data for April to September 
2009 shows that supply volumes have been lower than the 
2009/1 target (2.9% against a 3.25% target). 

Impact of the US Subsidy 

A subsidy of one dollar for every gallon of biodiesel blended 
into fossil diesel in the USA was in place at the start of 
the 2008/09 obligation period. The US subsidy created a 
significant market distortion and had a major effect on the 
competitiveness of EU (including UK) biodiesel suppliers. 
As a result, biodiesel production throughout the EU was 
significantly, negatively, impacted between 2007 and 2009. In 
the UK, the level of biodiesel produced fell by a third between 
2007 and 2008. The discrepancy and the DfT's revisions to 
targets may also have contributed to this. A countervailing 
import duty was introduced by the European Commission 
in May 2009 to help reduce the impacts of the US subsidy. 

The cheap subsidised supplies imported from the US 
benefited obligated suppliers, as they were able to source 
biodiesel significantly more cheaply than fossil diesel once 
duty differences were taken into account. 



46 Renewable Fuels Agency 



Year One of the RTFO 



Impact of the Gallagher Review and DfT 
revision to targets 

The reduction in RTFO targets in 2008/09 arising from the 
Gallagher Review had mixed business effects: 

• The lower targets have delayed the need for investment 
in new infrastructure in the UK and this will have benefited 
companies yet to invest. 

• The resultant reduced future demand for biofuels will 
adversely affect biofuel producers and feedstock suppliers, 
relative to the originally planned targets. 

• The revisions reduced investor confidence making it more 
difficult to attract funding for biofuel projects (this was 
compounded by the global financial crisis). 

• Stakeholders said that it had reduced business confidence 
in the RTFO as a long-term framework for supply of 
biofuels. They indicated the need for Government policy 
and regulation to be consistent, with four to five years 
stability required for confidence in investment to return. 

There were also specific impacts on bioethanol supply. 
Due to additional supply infrastructure requirements (unlike 
biodiesel, bioethanol cannot be used in distribution pipelines) 
it was expected that the introduction of bioethanol would lag 
behind biodiesel. Significant supply was anticipated during 
2009/10 when fuel blending limits for biodiesel would have 
effectively required significant volumes of bioethanol supply. 
However, the reduction in targets has delayed this. Recent 
changes to fuel quality specifications which allow biodiesel 
blends of up to seven percent have compounded the effect. 

Several planned UK bioethanol production facilities have 
been delayed or shelved as a result of market conditions. The 
loss of investor confidence has arisen from both the global 
financial crisis and revisions to Government targets during 
a year that made attracting funding for biofuels projects 
particularly challenging. 

Impacts of carbon and sustainability 
reporting 

Whilst widely accepted as fundamental to supporting 
sustainable biofuels, C&S reporting was anticipated to place 



an additional regulatory burden on business. Information 
provided by stakeholders indicated that reporting: 

• had a cost to business in sourcing and verifying C&S data 
through the supply chain similar to RIA estimates; 

• provided an excellent learning opportunity prior to the 
forthcoming mandatory requirements in the RED that was 
recognised as a benefit for both obligated suppliers and 
biofuel producers; 

• did not create a financial premium for the supply of 
sustainable feedstock with lower carbon intensity. Those 
suppliers with an enhanced C&S profile may, however, have 
benefited from easier market access to some obligated 
suppliers that had a stronger focus on sustainability. 

Key lessons learnt from the first year of 
operation 

The RTFO has, overall, not been onerous to business - 
either obligated suppliers or vehicle manufacturers. The 
C&S reporting requirements have imposed new information 
burdens which have been felt across the supply chain, 
but have been accepted as necessary by the majority of 
stakeholders. 

The introduction of the RTFO has brought only limited 
benefits to UK industry in its first year of operation. 
Whether benefits to UK industry will accrue in the future is 
currently uncertain: UK supply has to operate in a competitive 
international market which can be significantly affected by 
subsidies elsewhere. Investor confidence is low due to both 
international conditions and changes in Government policy. 

The UK Government's implementation of the RED and FQD 
were seen by industry as key issues going forward. The RTFO, 
and particularly the C&S reporting requirements, provided a 
platform and experience from which industry could benefit. 
However, it was felt that Government needed to understand 
the oil industry and biofuel trade markets better. Clear GHG 
targets were considered necessary to ensure the system 
effectively incentivised the market to supply better performing 
fuels. Stability in policy and clear long term goals to provide 
appropriate lead times were considered fundamental to 
success. 

The full study is available available at 
www.renewablefuelsagency.gov.uk/yearone. 



Year One of the RTFO 



Renewable Fuels Agency 47 



Land usage for biofuels from UK feedstocks 



Food, animal feed, and bioenergy all compete for agricultural 
land. Although the current biofuel contribution to global 
land-use is small, future forecasts raise concerns that 
increasing biofuel usage will drive unwanted direct and indirect 
land-use change with negative impacts on sustainability. It is 
therefore pertinent to examine the area of land used for the 
biofuel reported under the RTFO. 

During the 2008/09 year 8.5% of the biofuel supplied in 
the UK came from UK feedstock. Of this, 62% was from 
crops (oilseed rape and sugar beet) and the remainder from 
by-products (tallow, used cooking oil and MSW). 

Proportion of UK feedstock by volume 



Volume of feedstock, litres 
Oilseed rape 26m | 24% 
Tallow 5m | 5% 
■ UCO 36m | 33% 
I Sugar beet 41 m | 38% 
I MSW<1m|<1% 




Verified data 2008/09 obligation year 

Figure 3.6: UK feedstock by volume 

The farmed area for each crop has been estimated using the 
yield figures from the RFA's C&S Technical Guidance. Note 
that any crop grown in the UK for fuel which was supplied 
overseas is not included here. 



Feedstock 
(UK) 



Sugar beet 

Oilseed 
rape 



Adjusted 

volume of 

biofuel supplied 

in UK, 

million litres 

41.5 
32.5 



Estimated 
land area 
to supply 
biofuel, 
hectares 

9,520 
23,400 



Estimated 
percentage of 
country's crop 

by land area 

7.9% 
3.9% 



a Note that these values differ to those presented in other parts of this 
report as they have been adjusted to include 'unknown' country and 
feedstock data. 'Unknowns' have been distributed across the 'knowns' 
in proportion to the known volumes. 

b Based on DEFRA crop area figures for 2008 harvest. 

Table 3.5: UK feedstock land usage 



Sugar beet 

Sugar beet is grown in rotation with wheat, barley or pulses 
providing a break crop which returns organic matter to 
the soil and helps to prevent the build up of disease. UK 
beet farming is mostly in Eastern England, stretching from 
Yorkshire to Essex. Just over 9,500 ha of UK land was 
estimated to have been used for sugar beet destined for fuel 
use in 2008/09. This represents 7.9% of the UK's sugar beet 
crop. British Sugar is the UK's only sugar beet processor and 
operates plants making refined sugar products as well as a 
wide range of co-products including tomatoes and animal 
feed. Its bioethanol plant is integrated into its sugar factory at 
Wissington, Norfolk. All sugar beet grown in the UK is grown 
under contract to British Sugar and there is no technical 
distinction between beet grown for sugar products and that 
for ethanol. This means that no changes to variety or farming 
practice for fuel production have taken place. 

Oilseed rape 

Oilseed rape is grown as a break crop in rotation with cereals 
providing benefits for subsequent crops as well as financial 
return. 

Oilseed rape produces more oil per hectare than other non- 
tropical oil crops, although significantly less fuel per hectare 
than sugar beet. This means that although more sugar beet 
ethanol was supplied in 2008/09 than Oilseed rape biodiesel, 
the land area for the Oilseed rape was estimated at over 
23,000 ha, more than twice that for the sugar beet. Our 
calculations estimate that biodiesel was the end product for 
3.9% of the UK's Oilseed rape by area in 2008/09. When oil 
seeds are crushed to extract the oil, the left over product 
is protein-rich and is used in animal feed. The land-use 
calculations have not taken this valuable co-product into 
account. 

Co-products and land demand 

As noted above, oilseed rape is far less productive than 
sugar beet as a biofuel crop. However, this ignores the value 
of the rape meal co-product. The existence of co-products 
thus makes it very difficult to adequately compare the land 
demand of different biofuel feedstocks. The high protein 
of this co-product makes it suitable for animal feed which 
can be used instead of other protein sources such as soy, 
which also require land. Analysis by CE Delft for the Gallagher 
Review indicated that for rapeseed, soy, wheat and maize, 
the effect of displacing protein rich crops is to reduce net 
land requirements per tonne of biofuel by 60-81 %. 



48 Renewable Fuels Agency 



Year One of the RTFO 



General farming practice 

As with all industries, farming technology is constantly 
developing. 'Precision farming' technology is starting to be 
implemented in the UK and has the potential to be able to 
reduce fertiliser, pesticide and herbicide usage by targeting 
them more precisely to crop needs and preventing overlap of 
application areas. This in turn will reduce the GHG emissions 
associated with the cultivation of the crop. Most of these 
technologies require significant upfront capital investment 
by the farm and therefore a clear business case needs to 
be apparent before the technologies are implemented. 
Depending on the technology under consideration and the 
farm size, payback is possible from the cost savings made 
in fertiliser and other inputs, especially if targeted application 
leads to increased yields. However, if crop value is increased 
due to reduced carbon emissions this could further incentivise 
the implementation. The biofuels segment is expected to be 
the leading driver in this area since the carbon emissions of 
biofuels are one of the key reasons for their support. This 
may come about through the implementation of the FQD 
which sets carbon reduction targets for fuel suppliers. 




Conclusion 

In 2008/09 UKfeedstocks made a relatively minor contribution 
to biofuels supplied in the UK. Furthermore, biofuels are 
currently a minor end use for UK feedstocks. As such, the 
RTFO does not appear likely to have had a significant impact 
on the area or the practices in UK agriculture at this stage. 
This is confirmed by the results of the assessment of the 
impacts of the RTFO in the UK, which found the RTFO had 
had little effect on the agricultural markets (see Impacts of the 
RTFO on UK business, page 45). 

Looking ahead, ambitious plans for new production facilities 
to meet the future requirements of the RTFO, particularly for 
wheat derived bioethanol, can be expected to have a more 
significant effect on UK agriculture. The RFA will continue to 
analyse and report on the effects of this expansion in the 
future. 



Year One of the RTFO 



Renewable Fuels Agency 49 



International effects 
of the RTFO 

Land usage for biofuels from international feedstocks 



During the 2008/09 year 73% of the biofuel supplied in 
the UK came from international feedstock 1 . Of this, 64% 
was from crops (oilseed rape, palm, soy and sunflower) 
and the remainder from by-products (tallow, UCO, cheese 
by-product, molasses and sulphite). 

For each crop, the area farmed for UK biofuel in each country 
has been estimated using the yield figures from the RFA's 
C&S Technical Guidance. These figures have been compared 
to the total area of this crop in each country. 



Feedstock 


Country 
of origin 


Adjusted 3 
volume 
of biofuel 
supplied in 
UK, million 
litres 


Estimated 
land area 
to supply 
biofuel, 
hectares 


Estimated 
percentage 
of country's 
crop by land 
area 


Oilseed 
rape 


Belgium 


0.4 


266 


2.5% 


Canada 


31.9 


47,600 


0.7% 


France 


50.3 


34,500 


2.4% 


Germany 


180.7 


114,000 


8.4% 


Ireland 


0.1 


69 


0.8% 


Russia 


7.9 


14,700 


2.5% 


Sweden 


1.2 


1,040 


1 .2% 


Ukraine 


9.9 


19,200 


1 .4% 


USA 


12.9 


18,000 


4.5% 


Palm 


Indonesia 


38.9 


12,900 


0.3% 


Malaysia 


89.2 


27,500 


0.7% 


Soy 


Argentina 


97.0 


211,000 


1 .3% 


Brazil 


8.0 


17,300 


0.1% 


USA 


337.6 


716,000 


2.4% 


Sunflower 


Sweden 


0.1 


88 


n/a b 


Ukraine 


2.3 


4,500 


0.1% 


Sugar 
cane 


Brazil 


179.9 


31,400 


0.4% 


Pakistan 


1.9 


497 


0.0% 



a Note that these values differ to those presented in other parts of this 
report as they have been adjusted to include 'unknown' county and 
feedstock data. 'Unknowns' have been distributed across the 'knowns' 
in proportion to the known volumes. 

b Based on USDA or FAO figures for crop area as appropriate. 

c No data for the Swedish sunflower crop area could be found. 

Table 3.6: Estimated overseas land area used for UK 
biofuels 



Adjusted volume of UK biofuel 

sourced from international 

crop feedstocks 




Feedstock volume, litres | estimated area, ha 



Oilseed rape Belgium 


<1m|266 


Oilseed rape Canada 


32m | 47,600 


Oilseed rape France 


50m | 34,500 


Oilseed rape Germany 


181m | 114,000 


Oilseed rape Ireland 


123m | 69 


Oilseed rape Russia 


8m 1 14,700 


Oilseed rape Sweden 


1m 1 1,040 


Oilseed rape Ukraine 


10m | 19,200 


Oilseed rape United States 


13m |18,000 



Figure 3.7 a,b: Biofuel volume and crop area 

Soy 

As can been seen from the data, the feedstock with the 
largest estimated crop area is soy (944,000 ha). Soy also 
provided the largest volume of fuel; however, it has a 
significantly lower oil yield than the other crops and therefore 
takes a proportionately larger area of land. Soy represents 
an estimated 42% of the fuel supplied from overseas crops 
and occupies 74% of the land used. As with oilseed rape 
(below), there is an animal feed co-product from soybean 
oil extraction which has not been taken into account in the 
above calculations. Even given the large areas occupied by 
soy for UK biofuel, its proportion of the total soy crop area 
in each country is small. From our analysis 2.4% of the US 
soy crop has been used for UK biofuel. In comparison only 
1 .3% of the Argentinean and 0.1 % of the Brazilian soy crop 
were used. 



1 A further 1 9% was of unknown origin. 



50 Renewable Fuels Agency 



Year One of the RTFO 



Estimated overseas land area used for 
UK biofuels by feedstock and country 




Palm Indonesia 
Palm Malaysia 
Soy Argentina 
Soy Brazil 
Soy United States 
Sunflower Sweden 
Sunflower Ukraine 
Sugar cane Brazil 
Sugar cane Pakistan 



39m 1 12,900 
89m | 27,500 
97m |211,000 
8m | 17,300 
338m | 716,00 
<1m | 88 
2m | 4,500 
180m |31,400 
2m | 497 



Oilseed rape 

After soy, oilseed rape required the next largest amount of 
land for UK supplied Piofuels. This was dominated Py German 
rape, which provided the largest proportion of an individual 
country's production for a feedstock at 8.4%. 

In 2007, only 4% of Germany's oilseed rape crop was 
exported 2 , so this represents a significant increase in exports. 
Interestingly, USDA data indicates that the land area of 
oilseed rape in Germany actually decreased Petween 2007 
and 2008, so the increase in exports does not appear to 
Pe linked to increased land area. The explanation appears 
to lie in the significant drop in Germany's domestic Piodiesel 
consumption, and a corresponding fall in the production 
output Petween 2007 and 2008 2 , widely attriPuted to a 
change in their tax regime. 



Palm oil 

In 2008/09, 15% of Piofuel from crops was reported to be 
derived from palm oil. As the palm crop is very land-efficient 
compared to other oil crops, this required only three percent 
of the overall land required for biofuels supplied into the 
UK market. The palm oil supplied came from Malaysia and 
Indonesia. Taking the working assumption that the palm 
oil from unknown origin came from these two countries in 
proportion to their known supply, the land-use as a proportion 
of each country's total crop was 0.7% for Malaysia and 0.3% 
for Indonesia. 

Sugar cane 

Sugar cane was the only crop grown overseas used as a 
bioethanol feedstock, contributing 80% of UK supplied 
bioethanol. An estimated 31,400 hectares of land, an area 
approximately the size of Malta, was required to cultivate 
sugar cane in Brazil as a feedstock for bioethanol. This 
represented only 0.4% of the Brazilian sugar cane crop. 

Conclusion 

Despite the fairly significant volumes of feedstocks required 
to meet the RTFO, the analysis demonstrates that, thus far 
at least, UK supplied biofuels used only a small portion of 
any one country's feedstock production. On the one hand, 
this emphasises the potential to take measures to increase 
production in sustainable ways, including avoiding iLUC, and 
still meet the whole of UK biofuels demand. On the other, it 
also helps illustrate why the efficacy of national measures to 
promote sustainability in the biofuels sector is constrained by 
the relative importance of biofuels as a market. 

The EU Renewable Energy and Fuel Quality Directives 
are expected to significantly increase EU demand for 
international biofuel feedstocks. This has the potential to 
increase the negative impact of agricultural expansion. At the 
same time, however, new sustainability requirements placed 
on an increasingly large market could provide a catalyst for 
widespread improvements in the sustainability of agricultural 
practice. 



2 German country report to IEA Task 40 (July 2009). 



Year One of the RTFO 



Renewable Fuels Agency 51 



Case study - Malaysian palm oil 



Palm oil based biodiesel attracted the most critical attention 
of all the biofuel used in the UK under the RTFO. In 2008/09 
1 27 million litres of palm oil biodiesel were reported to the 
RFA - 10% of UK biofuel usage. Palm is significantly more 
productive per hectare than any other oil crop, but historically 
a high proportion of palm expansion has occurred at the 
expense of primary forest and of peatland. Critics believe 
increased demand for palm based biodiesel is a major driver 
of deforestation. Proponents believe palm's high productivity 
prevents land-use change elsewhere, and that it is a key 
driver of economic development in Malaysia and Indonesia. 

The case study summarised here is focused on palm oil 
production in Malaysia. Many of the issues, however, are 
shared to a greater or lesser extent with other producer 
countries, in particular Indonesia. The full case study is 
available at www.renewablefuelsagency.gov.uk/yearone. 

Carbon emissions 

If palm oil expansion causes loss of natural forest, the 
carbon release associated will negate any potential carbon 
savings from the use of palm biodiesel. Given 'typical' 
values for forest carbon stock and subsequent plantation 
carbon stock, and default carbon savings as outlined in the 
RFA C&S Technical Guidance, the land-use change emissions 
would take approximately 1 30 years to repay. 



Company 


Proportion 

of 
company's 
fuel derived 
from palm 


Proportion 

of 

company's 

palm RSPO 

certified 


BP 


6% 


100% 


Chevron 


10% 


0% 


ConocoPhillips 


2% 


0% 


Esso 


13% 


0% 


Greenergy 


4% 


0% 


Harvest 


2% 


0% 


Mabanaft 


14% 


0% 


Morgan Stanley 


22% 


0% 


Murco 


20% 


0% 


Petroplus 


16% 


0% 


Prax 


26% 


0% 


Total 


19% 


0% 


Overall proportion of UK supply 


10% 


0.5% 



Table 3.7: Companies supplying biodiesel from palm 



If cultivated on peatland, the situation is worse. Tropical peat 
bogs hold many times more carbon below ground than is 
contained above ground in natural rainforest. This is true of 
forested, logged over, degraded and naturally unforested 
peatland. The carbon payback for biodiesel feedstock 
produced on peatland can be measured in millennia. 

Some industry voices in Malaysia refute the claims that oil 
palm is still a driver of deforestation, but there is evidence 
to the contrary. While deforestation and peat conversion 
appear relatively restricted in peninsular Malaysia, in the state 
of Sarawak (where future oil palm expansion appears most 
likely to be concentrated) peat conversion is legally permitted 
and NGOs have reported that licenses are routinely granted 
for projects on forested land. The biodiesel market is widely 
considered to be a driver of plans to expand palm area. Palm 
industry organisations have opposed the ban on expansion 
on peatland under the RSPO standard. 



yield a further source of renewable energy. This technology is 
not typically adopted however, and wider implementation of 
capture and storage would require investment. 

Other environmental issues 

Currently, oil palm cultivation relies on the herbicide Paraquat 
for weed management. Paraquat is highly toxic to humans 
and other mammals, and its use is illegal in several EU 
countries. Its use was made illegal in Malaysia in 2005, but 
this ban was revoked in 2006. Its use is currently still allowed 
under the national interpretations of the RSPO principles and 
criteria. The adoption of safer alternatives is highly desirable. 

Agricultural chemical use in palm oil cultivation has a high 
potential impact on human health. Women, often employed 
to spray crops, are particularly vulnerable for physiological 
reasons. RSPO certification goes some way to reducing 
these impacts. 



Methane from palm oil mill effluent (POME) ponds is a high 
source of GHG emissions where there is no methane capture. 
Capturing this methane substantially improves the lifecycle 
emissions of palm biodiesel - and the captured biogas can 



Plantation establishment, when it requires land clearance, is 
linked to water pollution and soil erosion. These impacts can 
be avoided by preventing deforestation for palm. 



52 Renewable Fuels Agency 



Year One of the RTFO 



Social issues 

Palm oil is undoubtedly a significant contributor to the 
Malaysian economy, providing about 5% of Malaysia's GDP. 
It is also widely acknowledged to cause land conflict, and 
has a variable record on workers' rights. 

Though it provides jobs, reports suggest these are often 
taken by Indonesian immigrants (sometimes illegal) rather 
than members of local communities. Historically, it seems 
that in general there has not been a tradition of constructive 
interaction between plantation management and communities 
of workers and/or locals. Low estate wages can limit the 
contribution of palm to sustainable economic development 
and make the work unattractive to local communities. 

There are opportunities for smallholders to profit from 
palm oil production. Smallholder yields are lower than 
larger estates, but these can be improved with access to 
better seed varieties. Smallholder returns can be limited by 
structural issues such as effective monopoly relationships 
with local mills and poor access to finance. Nevertheless, 
the smallholder model maybe a better driver of sustainable 
development opportunities than the estate model. 

Indigenous communities are likely to find that plantation 
development on or near their land does not improve their 
economic circumstances. Affected communities will typically 
lose some or all of their traditional means of support from 
the forest, becoming more vulnerable to food and financial 
insecurity. Many indigenous people have low employability if 
displaced into an urban environment. 

While land conflicts in peninsular Malaysia are relatively 
unusual, evidence from Malaysian NGOs indicates that in 
Sarawak state they are almost ubiquitous on new estates, 
not least because consultation before expansion is often 
poor. Sarawak law does not provide adequate protection, 
and does not fully implement the UN Declaration on the 
Rights of Indigenous Peoples. 

RSPO 

The RSPO is a relatively young initiative, but is delivering 
significant improvements and, if further GHG criteria are 
added, has potential to manage most of the key issues. In 
particular, implementation can deliver biodiversity benefits 
and can drive better engagement with local communities. 
There are gaps in the current criteria - notably on expansion 
on peatland and other GHG emissions issues. 

The scheme has broad support, and provides good 
assurance that criteria are being implemented, as well as 




mechanisms to bring grievances. The key challenge to wider 
adoption is the current poor demand for certified fuel. 

On the basis of reported GreenPalm certificate values in 
November 2009, we estimate that all of the UK's palm based 
biofuel used in 2008/09 under the RTFO could have been 
RSPO certified, at a cost of less than one penny per litre 
of biodiesel. Assuming current supply trends continue; UK 
suppliers could in future absorb about 10% of the current 
annual RSPO certified crop. This would boost the scheme, 
provide substantial assurance for the sustainability of UK 
biofuel, and increase the likelihood of adoption of GHG 
standards by underlining the importance of the scheme in 
assuring EU biofuel imports. 

Conclusions 

Palm oil has the potential to contribute to sustainable 
development, and palm oil biodiesel can in principle deliver 
competitive lifecycle carbon savings. In the future, there 
are significant opportunities for sustainable expansion in 
appropriate areas as outlined , although these areas may 
not be extensive in Malaysia (see Avoiding indirect land-use 
change, page 62). 

However, as things stand the industry as a whole cannot be 
considered sustainable. Expansion appears likely to drive 
land conflict. Smallholder access to palm oil markets can 
assist poverty alleviation but there are structural barriers to 
maximisation of these benefits. The RSPO does, however, 
set a direction of travel to improve practices and results. 

In the short term, the evidence seems compelling that 
increased demand for palm oil biodiesel is a contributory 
driver to deforestation and peat degradation in parts of 
Malaysia. The palm industry cannot become sustainable 
unless the link between demand and deforestation can be 
cut. 



Year One of the RTFO 



Renewable Fuels Agency 53 



Case study - Brazilian sugar cane 



Production of sugar cane in Brazil 

Brazil is the world's leading producer of sugar cane at around 
35% of global production, followed by India and China. 

Approximately seven million hectares are currently under 
sugar cane cultivation in Brazil, representing 2.1% of the 
country's total arable land. The majority of the sugar cane 
production is in the centre-south region of Brazil (around 
90%), with an estimated 60% of the production from Sao 
Paulo state alone. 

Production of sugar cane in Brazil rose 92.4% between the 
harvests of 2000/01 and 2006/07 and continues to increase, 
with the 2009 harvest expected to be 10% above that of 
the previous year. The sugar cane and ethanol sectors are 
currently experiencing significant growth, driven by increased 
market demand - both domestic and international. The 
introduction of cars which can use both gasoline and ethanol 
('flex fuel' cars) is a strong domestic driver. 

Sugar and ethanol production are economically very 
important to Brazil: Sugar cane generates 16.5% of Brazil's 
agricultural GDP (around 2.5% of the total GDP), and the 
associated ethanol industries account for approximately 
1.1% of Brazil's total GDP. 

Sustainable development 

The Brazilian government has promoted the potential of 
the sugar cane industry to reduce poverty by generating 
employment and stimulating the economy. The sugar and 
ethanol industries collectively provide almost one million 
formal jobs in the country. However, increasing mechanisation 
is expected to significantly reduce the workforce required. 
The sugar cane industry is supporting re-skilling programmes 
to reduce the negative social impacts of the mechanisation. 

The salaries in the sector are higher than in most other 
agricultural sectors, although a significant proportion of the 
workers are temporary, employed only during the seasonal 
harvest. In some cases, producers undertake social projects 
that support local communities. However, overall the growth 
of sugar cane sector is not thought to significantly contribute 
to reducing poverty and inequity in the producer regions and 
may increase wealth concentration. 

Sustainability of production - environment 

Growing awareness of environmental issues both in Brazil 
and globally has led to concerns over the environmental 
sustainability of Brazilian sugar cane production. The major 



Supplier 


Proportion of 

supplier's fuel 

derived from 

sugar cane 


Proportion 3 

of supplier's 

sugar cane 

sustainability 

assured 


BP 


64% 


0% 


Greenergy 


40% 


67% 


Harvest 


52% 


0% 


Mabanaft 


3% 


0% 


Overall proportion of UK 
supply 


14% 


0% 



a BSI not yet operational. Suppliers can audit to RTFO Meta-Standard. 
Table 3.8: Suppliers reporting bioethanol from sugar cane 

issues with regards to the environmental sustainability of 
Brazilian sugar cane include land-use change, soil erosion, 
water scarcity, water contamination, burning and air quality. 

In order to meet the rising demand, the production is 
expected to more than double by 2017. Most of the future 
expansion is expected to occur on existing agricultural land, 
though there are concerns about potential expansion in the 
Cerrado grassland biome and the Pantanal wetland areas. A 
proposal to introduce agroecological zoning, which is still to 
be approved by Brazil's congress, is expected to reduce the 
sector's negative impacts from land-use change by limiting 
the area where sugar cane can be planted. Other federal 
laws, such as legal reserves, require a certain portion of a 
productive landscape to be put aside for conservation (e.g. 
35% in the Cerrado). There is also a law that requires that 
the remaining area of Atlantic forest is protected. However, 
concerns remain about potential indirect land-use change, for 
example displacement of cattle ranching and soy production 
into frontier areas as a result of sugar cane expansion. 

Erosion, water scarcity and water pollution are generally more 
localised problems, while air pollution caused by burning 
can have widespread effects on the health of workers and 
surrounding communities. Efforts are currently being made to 
phase out burning from sugar cane fields in the state of Sao 
Paulo and nationally. There are also laws which require that 
riparian areas (adjacent to waterways) and slopes are not 
planted with sugar cane, though in practice many companies 
have been slow to restore these areas. 



54 Renewable Fuels Agency 



Year One of the RTFO 




Sustainability of production - social 

The Brazilian sugar cane industry has been criticised by the 
media and NGOs for social problems, particularly in relation 
to working conditions of the large manual workforce used in 
harvesting sugar cane and the use of forced and child labour. 



of involvement compared to other voluntary initiatives. The 
Sustainable Agricultural Network recently amended their 
standard to include sugar cane, and producers are currently 
involved in the certification process. However, the standard is 
considered to be quite challenging in terms of its environmental 
and social requirements, and this may be a limiting factor in 
terms of uptake. The Better Sugar Cane Initiative, which is 
still under development, has attracted interest from Brazilian 
producers and the first certificates are expected in late 201 0. 
Furthermore, the Brazilian 'Initiative for the Development 
of Agricultural Activity Verification System', a Brazilian 
multi-stakeholder initiative, is developing common standards 
and procedures for a range of agricultural commodities (but 
is unlikely to include a certification programme). 

The Brazilian Sugarcane Industry Association has been 
actively promoting the Global Reporting Initiative Sustainability 
Reporting Framework in the sector. 

Project lenders such as the International Finance 
Corporation and Deutsche Investitions- und Entwicklungs- 
gesellschaft have also undertaken environmental and social 
assessments of sugar cane producers, and private sector 
companies including Coca-Cola, SEKAB and Greenergy 
have undertaken verification of suppliers. The Greenergy 
verification programme was developed specifically for the 
RTFO, and is based on the RTFO Meta-Standard. 



Both the Brazilian government and industry are making 
significant efforts to improve the working conditions and 
eradicate bonded labour and use of underage workers. The 
government maintains a black list of companies found with 
workers in slave-like conditions, of which four of the 163 
entries are sugar cane producers. 

While land rights remain a significant problem in Brazil, 
particularly in terms of inequitable distribution of arable land, 
landless people, and indigenous groups, there are limited 
examples of this in the sugar cane sector. 



Conclusion 

While there are potentially serious environmental and social 
impacts for sugar cane cultivation in Brazil, there are many 
examples of responsible companies following good practices. 
The development and increasing use of verification initiatives 
in Brazil serves as a mechanism to communicate good 
practice to the marketplace, and drive better performance 
where issues remain. 

The full study is available available at 
www.renewablefuelsagency.gov.uk/yearone. 



Verification schemes 

A number of verification schemes and production standards 
have emerged in response to sustainability concerns. These 
include a number of initiatives developed by a range of 
actors including the national and state governments, private 
sector companies and banks, as well as international multi- 
stakeholder initiatives that aim to introduce market-driven 
certification systems. 

In terms of producer participation, the Sao Paulo 
Agroambiental Protocol is thought to have the greatest level 



Year One of the RTFO 



Renewable Fuels Agency 55 



Section 4 

Towards sustainable biofuels 




56 Renewable Fuels Agency 



Year One of the RTFO 



'Gallagher' 18 months on 



Background 

In July 2008 the RFA published the Gallagher Review into 
the indirect effects of biofuels production. The report was 
commissioned by the Secretary of State for Transport in 
response to growing concern about the impact of rising 
global demands for biofuels on food prices, biodiversity and 
greenhouse gas emissions. A growing body of academic 
research suggested that biofuels would effectively displace 
agricultural production and cause damaging land-use 
change in other parts of the world. This led to calls for a 
moratorium on biofuels policies, particularly from NGOs, 
whilst the agricultural and biofuels sectors questioned the 
conclusions of the research and modelling. Governments 
and policy makers in the EU and elsewhere were trying 
to make sense of this new evidence at a time when many 
had recently introduced policies to support renewable fuels 
to tackle global warming and growing concerns about fuel 
security. In the EU the Renewable Energy Directive (RED), 
with ambitious proposals for renewable energy targets, was 
in the final stages of negotiation. 

Gallagher Review conclusions 

The review concluded that projected increased global 
demand for biofuels did carry significant risks that required 
urgent mitigation. It found that, whilst there was probably 
sufficient land for food, feed and biofuels, current policies did 
not ensure that additional production occurred in appropriate 
areas. As a result, the displacement of existing agricultural 
production was likely to lead to reductions in biodiversity and 
possibly increases in overall greenhouse gas emissions. It 
also found that biofuels would contribute to rising prices for 
some commodities that would adversely affect the poorest, 
but that the scale of these effects was complex and uncertain 
to model. 

On the basis of evidence gathered, the Gallagher Review 
concluded that a slowdown in targets was needed whilst 
appropriate mitigation measures were put in place. 

Towards consensus on indirect 
land-use change 

In dealing with such a sensitive issue, the Gallagher Review 
was always going to attract controversy. For the biofuel 
community, particularly in the UK where sustainability 
considerations had been at the forefront of the RTFO, the 
recommendations to slow down targets were especially 
unpopular. In contrast, whilst the NGO community generally 
welcomed the comprehensive evidence base provided 
by the Review, the recommendation to stop short of a full 
moratorium was similarly unpopular. 



Renewoble 
fi^els Agency 




With hindsight, it can be seen that the publication of the 
Gallagher Review marked a significant shift in the iLUC debate 
and enabled a new consensus to form: from an argument 
about the facts and whether iLUC was real or significant 
at the time of publication, discussion over the succeeding 
period has instead focussed on how policy should take 
iLUC into account. Very few commentators today seriously 
contend that iLUC can be safely ignored. Views on how to 
address the issue, however, remain contentious. 

Policy responses 

There was an immediate policy response to the Gallagher 
Review by a number of national governments. These 
included the UK, Ireland and the Netherlands who modified 
their biofuel targets in response to the new evidence. 

Following much debate, the target for the RED itself was 
maintained at 1 0% of transport energy by 2020. However, 
a requirement was built into the text for the European 
Commission (EC) to review the impacts of indirect land-use 



Year One of the RTFO 



Renewable Fuels Agency 57 



change and ways to minimise that impact by December 
2010. The EC have since conducted an informal consultation 
on a range of possible policy responses, but with no clear 
indication as yet of their preferred approach. 

In the United States, both in California and at the Federal 
level ambitious biofuel targets have also been confirmed but 
iLUC has been acknowledged as a significant factor that 
should be addressed. The US focus on policy responses has 
been on modelling work - the indirect land-use change factor 
(iLUC factor) approach. This approach starts by widening the 
boundaries of traditional lifecycle analysis (LCA) and attempts 
to identify displacement effects through economic modelling 
work. It then calculates the carbon emissions associated 
in the model with the displacement it has identified. This 
emission value is an 'iLUC factor', which can be added to 
traditional direct LCA calcuations to indicate the net carbon 
effect of the biofuel. 

Towards policy solutions 

The Gallagher Review noted that most work on indirect 
effects to date had focussed on attempting to quantify the 
effects through modelling. The Review recommended that 
this should continue, but noted that ultimately modelling 
approaches required subjective assumptions and that the 
results were inherently uncertain. The Review made the 
observation that far less work was being undertaken on 
practical measures that reduce the risk of unwanted indirect 
effects. Research on iLUC in the intervening period has 
largely maintained a focus on quantifying the problem. 

The Gallagher Review recommended the use of idle land, 
appropriate wastes and residues, and intensification of 
production as ways that iLUC might be avoided or reduced. 
Using approaches that raise overall production of agricultural 
commodities should also help to limit impacts on food prices. 
In follow up to this, the RFA commissioned two research 
projects to develop methodologies and case studies to 
objectively distinguish 'appropriate wastes' and energy crops 
with a demonstrably low risk of indirect effects. This work is 
summarised in the following two chapters. 



Food and Fuel 



In 2008, modelling work undertaken for the Gallagher Review 
established that demand from biofuel for food commodities will, in 
the medium term and other things being equal, exert an upwards 
pressure on food prices. These price rises would impact particularly 
strongly on the poor, and result in small percentage increases in 
levels of poverty. Overall, the negative impact on livelihoods of 
increased food prices would outweigh any economic benefits 
accrued by some farmers. 

At the same time as the Gallagher Review was undertaken, world 
food prices reached record levels. With biofuel usage increasing 
and the overlap between feedstock and food crops, many people 
concluded that the rise in biofuel usage was driving the spike. 
Reports analysing the price boom a ' b have generally concluded 
that while biofuels demand probably contributed, there were 
several other factors that were likely to have been equally or more 
important. These included the concurrent rise in oil prices; the 
effects of a weak dollar; intense speculation against commodity 
prices; and poor harvests in some areas in preceding years. 

If biofuels demand pushes up food prices, this will have negative 
impacts on poor people's livelihoods. However, the Gallagher Review 
argued that these impacts are within our capacity to manage. The 
cases we have identified (see Avoiding indirect land-use change, 
page 62) in which biofuels expansion will not drive indirect land- 
use change also offer the opportunity to minimise impacts on food 
prices, by driving additional production rather than competing for 
existing food supplies. The Roundtable on Sustainable Biofuels is 
working on criteria to ensure that biofuel cultivation contributes to 
local food security. The European Commission is due to report on 
the impacts of biofuels supplied to meet the RED on food prices 
in 2012. 

a The role of demand for biofuel in the agricultural commodity 
price spike of 2008' - DEFRA (January 201 0). 

b 'A global overview of vegetable oils, with reference to biodiesel' - 
International Energy Authority Bioenergy task 40 (June 2009). 



58 Renewable Fuels Agency 



Year One of the RTFO 



Indirect effects of using 
wastes, residues and 
by-products 



Background 

Wastes, residues and by-products (referred to as 'wastes' 
for short) are often held up as examples of truly sustainable 
feedstocks for bioenergy avoiding the sustainability risks 
associated with land demanding crops and offering particularly 
good greenhouse gas savings. With growing concern about 
indirect land-use change, the focus on 'wastes' as a possible 
solution to the sustainability challenge has increased. 

'Wastes' are currently used on a large scale to provide heat 
and power. They compete for support with other renewable 
technologies such as wind and solar. In contrast, today's 
biofuel technologies do not allow the conversion of most 
'wastes' into liquid road fuels, but advanced technologies 
offer this possibility and have consequently received great 
interest and growing investment. 

At the European level, the Renewable Energy Directive (RED) 
is expected to result in significant new demand for energy 
from biomass, including 'wastes'. Due to their perceived 
environmental benefits as feedstocks, and to encourage 
investment in advanced technologies, the RED requires that 
transport biofuels made from 'wastes' and 'residues' count 
twice towards compliance with national renewable energy 
obligations and the 1 0% target. 

However, recent research, including the RFA's Gallagher 
Review, has drawn attention to the possible indirect effects 
of redirecting biomass resources to energy end uses. These 
effects are not included in the current life-cycle carbon 
reporting methodologies for the RTFO or the RED, as the 
system boundaries are drawn too narrowly to capture 
them (Fig 3.5, page 42). The current methodologies do not 
consider what would have happened to the resource if it 
were not used in energy applications, and the subsequent 
effects of its availability being withdrawn from alternative uses 
or disposal systems. 

The RFA and the Department for Energy and Climate 
Change (DECC) commissioned research to develop a 
methodology for quantifying the indirect greenhouse gas 
impacts of using wastes, residues and by-products for 
biofuels or bioenergy, and to provide an evidence base on 
these effects through the use of case studies. It considered 
UK tallow, MSW, straw and molasses. The results from the 
studies are provided below; the full report is available at 
www.renewablefuelsagency.gov.uk/yearone. 

Methodology 

The basic approach is relatively straightforward: indirect GHG 
effects are determined by identifying the existing uses (or 



disposal pathways) for the material; the possible alternative 
products switched to; and the emissions resulting from the 
production of those substitutes (or change in emissions from 
waste disposal). 

The detailed methodology is set out in the full report. It 
includes an estimation of the level of demand from biofuel 
and bioenergy, and the estimation of an 'order of dispatch' 
- the order in which existing users of the feedstock material 
will switch to substitute materials or alternative production 
systems at varying levels of increased demand. 

One notable aspect of the methodology is that the indirect 
GHG effect may be different for feedstocks sourced from 
different localities, regions and countries. For example, the 
current uses of tallow in the US are significantly different 
from current tallow uses in the UK, and therefore the indirect 
effects of using US tallow for biofuel and bioenergy may be 
significantly different from the use of UK tallow. 

Key findings 

The use of materials which have existing uses (in the absence 
of bioenergy usage) is likely to create negative indirect 
greenhouse gas effects (i.e. create additional emissions 
which are not currently accounted for in the carbon reporting 
methodologies for the RTFO or the RED). On the other hand, 
the use of materials which are disposed of (in the absence 
of bioenergy usage) can result in large avoided greenhouse 
gas emissions (i.e. create a reduction in emissions which is 
not accounted for in current carbon reporting approaches). 

Different levels of certainty are achievable in quantifying the 
indirect GHG effect for different feedstock materials. The 
certainty of the assessment will depend on a number of 
factors: the number of existing uses or disposal pathways; 
the complexity of the markets in which the material is traded; 
the number of possible alternative production systems for 
the material; the range of possible emissions factors for 
the substitutes and existing disposal pathways; and the 
availability of data for these factors. The assessment for 
some materials will therefore be highly uncertain, while for 
other materials more certainty can be achieved. 

Understanding the uncertainty in the assessment of indirect 
GHG effects is important for interpreting and using the output 
results. Although there may be low certainty for any individual 
estimated emission, the findings from an assessment may 
still allow a clear conclusion if all the outcomes from the 
assessment point in the same direction (e.g. all outcomes 
show a negative and significant indirect effect, although the 
range of possible outcomes is large). 



Year One of the RTFO 



Renewable Fuels Agency 59 



Tallow 

The findings for UK tallow show a large range of possible indirect 
effects (an increase of between 0.89 and 3.03 tC0 2 e/tonne of tallow 
used) - all the outcomes are negative. The graph shows the lower, 
upper and central estimate figures for the indirect effects of using 
tallow for biodiesel production, applied to the RFA's default value for 
tallow methyl ester biodiesel. In the lower bound case, the net (direct 
and indirect) emissions give a carbon saving of 56% (relative to fossil 
diesel); in the upper bound case there is a net increase in emissions 
of 13%. 



Indirect effect applied to RFA default 
for tallow methyl ester biodiesel 



5 100 



| 60 
E 





I Direct effects 

Minimum 
indirect effects 

Best estimate 
indirect effects 

Maximum 
indirect effects 

I Fossil fuel 
comparator 



Direct emissions Direct + indirect Fossil fuel 

only emissions comparator (diesel) 



Municipal solid waste 

The indirect GHG effect from the use of municipal solid waste (MSW) 
is relatively certain, and also positive, in comparison with the other 
materials studied. The indirect impact of switching one tonne of 
residual MSW away from landfill is calculated as a saving of 0.5 tC0 2 e. 
For sub-categories of MSW the figures are savings of 0.78 tC0 2 e for 
garden waste, 0.97 tC0 2 e for paper and 0.5 tC0 2 e for food waste. 
The graph shows the indirect effect for switching residual MSW 
away from landfill, applied to the RFA's default value for biogas from 
UK MSW. The fossil fuel comparator used is fossil diesel. The net 
emissions show a carbon savings of 1 93% (relative to fossil diesel). 



Indirect effect applied to RFA default 
for MSW methyl ester biodiesel 



i 

i 



Direct Indirect Direct + Fossil fuel 

emissions emissions indirect comparator 

only only emissions (diesel) 



Indirect effects 

Direct + indirect 
effects 



comparator 



Straw 

The UK wheat straw case study shows a range of possible indirect 
effects (an increase of between 0.002 and 0.038 tC0 2 e/tonne 
of wheat straw used for biofuels/bioenergy), dependent on the 
substitutions and data used. It should be noted that none of the 
possible outcomes show a large indirect effect. Applying a 'most 
likely' scenario, the indirect effect is estimated to be an increase 
of 0.0074 tC0 2 e/tonne of wheat straw used. Applying this indirect 
effect value to a direct emissions figure for lignocellulosic bioethanol 
reduces the net greenhouse gas savings from 81 % to an 80% saving 
(relative to petrol). 



Indirect effect applied to RFA default 
for straw lignocellulosic bioethanol 




Minimum 
indirect effects 

Best estimate 
indirect effects 

Maximum 
indirect effects 

| Fossil fuel 
comparator 



Direct emissions Direct + indirect Fossil fuel 

only emissions comparator (petrol) 



Molasses 

The case study for European sugar beet molasses also shows a 
range of possible indirect effects (an increase of between 0.1 and 
0.4 tC0 2 e/tonne of molasses used for biofuels and bioenergy), 
dependent on the substitutions and assumptions used. These 
figures equate to an indirect effect of increasing emissions by 1 8 to 
75 gC0 2 e/MJ ethanol. Applying these values to the RFA default 
emission for UK sugar beet molasses results in a range of net 
greenhouse gas emissions from a 35% saving to a 32% increase 
(relative to petrol). 



Figure 4.1 a,b,c,d: 

Indirect effects 

of using 'wastes' 



Indirect effect applied to RFA default 
for molasses bioethanol 




Minimum 
indirect effects 

Maximum 
indirect effects 

I Fossil fuel 
comparator 



Direct emissions 
only 



Direct + indirect Fossil fuel 

emissions comparator {petrol} 



60 Renewable Fuels Agency 



Year One of the RTFO 



'Some 'wastes' are very good to use as bioenergy, 

and some others are not' 



Implications for bioenergy policy 

As with calculating indirect land-use change, calculating the 
indirect effects of 'wastes' is methodologically challenging, 
and the nature of indirect effects is such that at least some 
level of uncertainty is inherent. Nevertheless, the methodology 
can be used to establish the direction and magnitude of the 
effect. Significantly, it also illustrates very clearly that some 
'wastes' are very good to use as bioenergy, and some others 
are not. 

The key issue is whether the particular feedstock is used 
productively for something else already. The question for 
policy makers is whether and how to respond to the evidence. 

Under the RED, biofuels made from 'wastes' and 'residues' 
will count twice towards targets based on the expectation 
that such fuels offer additional sustainability benefits. If the 
policy is to incentivise fuels that genuinely offer increased 
sustainability, the study illustrates that it is important that the 
definitions of 'wastes' and 'residues' are qualified to ensure 
only materials which can be expected to create a significant 
net GHG saving are counted twice. 

It should also be noted that, as with indirect land-use change, 
there are actions that bioenergy producers may be able to 
undertake to limit or mitigate their negative indirect GHG 
effects. These include sourcing materials from countries or 
regions where the material has low levels of utilisation or has 
low carbon substitutes; increasing the efficiency of use of 
the material to free a proportion for bioenergy applications; 
entering into agreements with existing users of the material 
to promote the use of low carbon substitutes or alternatives. 







Year One of the RTFO 



Renewable Fuels Agency 61 



Avoiding indirect land-use 
change 



Background 

In follow up to the Gallagher Review recommendation 
to identify demonstrably sustainable biofuels, the RFA 
commissioned work to develop a methodology that can 
objectively distinguish energy crops with a low risk of indirect 
effects. As with the study on wastes and residues, the study 
results are relevant for bioenergy generally (where purpose 
grown feedstocks are used) rather than biofuel in particular. 
The work is based on an analysis of six 'real life' case studies. 

How the methodology will be used 

The methodology should enable individual companies to 
initiate projects that can demonstrate that the resultant 
biofuel has a low risk of indirect effects. It sets out the criteria 
that would need to be complied with for this purpose and 
how compliance with these criteria could be demonstrated 
and verified. The RFA intends to include this methodology as 
an option for fuels supplied under the RTFO from April 201 
and will put it forward for consideration for inclusion in other 
biofuel sustainability schemes such as RSB and policies 
such as the RED. 



The methodology and underlying 
case studies 

Indirect effects of additional biofuel feedstock production 
are the result of a displacement of existing production on 
land that was already in use for other purposes e.g. existing 
oilseed rape production that was previously used for the food 
sector is now used for biodiesel production. The demand for 
the vegetable oil for food is likely to remain, and therefore 
can be expected to be met from somewhere else. As the 
vegetable oil market is quite fungible, the displaced demand 
could be met from a different feedstock in a different country 
e.g. Malaysian palm oil. Unless and until all of the agricultural 
commodity markets adopt sustainability standards, the risk 
is that the displaced demand will be met from unsustainable 
sources. 

Preventing displacement, by realising additional production 
instead of displacing existing production, is therefore at the 
heart of the project level solutions proposed here to minimise 
the risk of indirect effects. 



Case study 


How it prevents 
iLUC 


Economic viability 


Key barriers 


Carbon and 
sustainability 


Potential 




Expanding onto 'unused' land 


Palm oil on 

Imperata 3 
grassland 


Increase palm oil 
production without 
displacement by 
expanding onto 
'unused land' 


Neutral/positive 

- Lower planting costs 

- Lower/equal operational 
costs 

- Good yields with good 
practices 

- No timber income, but 
places with high value timber 
scarcer 


- Land right conflicts 

- Technical barriers for 
smallholders 

- Preference for 
(secondary) forest 

- Perceived soil fertility 

- No policy incentives 


Risks 

- Informal land rights 
and uses 

- Use of pesticides 
Opportunities 

- Increased carbon 
stocks 

- Economic 
development 


> 35 Mha Imperata in 
Asia 

> 8.5 Mha in Indonesia, 
3-4 Mha suitable for 
oil palm in Indonesia, 
compared to 4.5 Mha 
today 




Increasing land productivity of non-bioenergy systems 


Sugar 
cane- 
cattle 
integration 


Sugar cane 
production is 
introduced while 
maintaining or 
increasing milk/beef 
production 


For the mill owner: neutral 

- Few additional investments 

- Some missed income from 
excess electricity 

- Bagasse animal feed sold at 
cost price 

For the cattle owner: positive 

- Income increased > 7-fold 


- Mill owner has to 
deal with several 
cattle farmers 

- Dependency of cattle 
farmer for bagasse 

- Preference for 1 00% 
sugar cane for infra 
investment 

- Knowledge 


Risks 

- Dependence of cattle 
farmer on mill for their 
feed 

- Biodiversity of pasture 
Opportunities 

- Higher income cattle 
farmers 

- Reduced land 
conflicts 

- Reduced pressure on 
land from cattle 


> 450 Mha of extensive 
cattle in South America 

> 200 Mha in Brazil 

> 140 Mha suitable for 
sugar cane in South 
America, compared to 
8 Mha today 



a Areas of cleared forest in Indonesia have become overgrown by Imperata. This grass prevents the land from developing naturally into secondary forest 
and is therefore considered to be problematic (Reinhardt et al., 2007). 

For more details and other case studies see the full report at www.renewablefuelsagency.gov.uk/yearone 

Table 4.1: Information on selected case studies 



62 Renewable Fuels Agency 



Year One of the RTFO 



The proposed criterion for Pioenergy feedstock production 
with a low risk of indirect effects therefore is: 

Additional production has been realised without 
displacing existing provisioning services of the land 

The methodology focuses on three main options to comply 
with the aPove criterion. The feasiPility of these options, their 
economics, Parriers, sustainaPility impacts and their potential 
were analysed using the following 'real life' case studies: 

1 . The use of land without provisioning services 1 : 

a) Expanding oil palm production on Imperata 
grassland in Indonesia. 

2. Increasing land productivity through integration with 
non-bioenergy feedstock systems: 

a) Integration of sugar cane with cattle in Brazil 

b) Integration of soy with cattle in a rotational system 
in Brazil. 

3. Increasing the land productivity of existing 
bioenergy feedstock systems: 

a) Increasing the yields of an existing sugar cane 
plantation in the Philippines; 

b) Increasing the yields of existing palm oil production 
in Liberia. 

In addition, the report includes an analysis of a specific 
feedstock-region mix looking at EU Wheat bioethanol with 
useful co-products replacing soy meal and grains for animal 
feed. A summary of two of these case studies is included in 
Table 4.1. 

While the conclusions are specific to each study, overall the 
case studies demonstrate that there is significant potential to 
increase bioenergy feedstock production without displacing 
production for other purposes. For example, the potential for 
sugar cane expansion in South America through integration 
with cattle (without displacing the cattle) is several times 
larger than the current sugar cane area. Another example is 
the large potential for oil palm to expand without converting 
forests - in Indonesia alone there may be some 3 to 4 Mha 
compared to the current 4.5 Mha of palm plantations. 




The analysis of EU wheat took a different approach to the 
other case studies, taking a feedstock-region rather than 
project level approach. 

The analysis found that, whilst this may offer an interesting 
approach to identify biofuels with a low risk of indirect effects 
at a higher level of aggregation than at the individual project 
level, there would remain an element of displacement. 
Additional analysis would therefore be required on where the 
displaced feedstock would come from to be able to draw 
firm conclusions on whether such biofuels offer a low risk of 
indirect effects. 

Whilst the feedstock-region approach requires more analysis, 
the project level case studies demonstrate significant 
opportunities that are just as economically viable (or even 
more so) than the dominant production models that put a 
higher pressure on land-use change. 



1 The Millennium Ecosystem Assessment distinguishes four categories 
of ecosystem services: provisioning services, regulation services, cultural 
services and supporting services. Provisioning services are defined as 
harvestable goods such as fish, timber, bush meat, genetic material, etc. 
(Commission for Environmental Assessment, 2006). 



Year One of the RTFO 



Renewable Fuels Agency 63 





'Unused land' 


Integration with non-bioenergy system 


Increased productivity of existing 
bioenergy feedstock system 


The iLUC criterion 


Additional production has been realised without displacing existing provisioning services of the land 


Demonstrating 
additionality 


Demonstrate the project activity that increases feedstock production is additional: i.e. in absence of the bioenergy feedstock 
demand the measure would not have been implemented during the crediting period 3 


The land would not have 
been taken into production 


The integration model would not have been 
implemented 


The yield increasing measure would not 
have been implemented 


Setting the baseline 


Zero (land previously 
unused) 


Business as usual production levels of 
non-bioenergy system (e.g. milk or beef) 


Business as usual production levels of 
existing bionergy system 


Monitoring 


Monitoring of realised 

bioenergy feedstock 

production levels 


Monitoring that baseline production levels of 
non-bioenergy feedstock are maintained 


Monitoring of realised bioenergy 
feedstock production levels 


Claim that can be 
made 


All realised production has a 
low risk of indirect effects 


All realised bioenergy feedstock production has a 
low risk of indirect effects 


The additional production ('realised 

production' minus 'baseline production') 

has a low risk of indirect effects 



More details, e.g. on how to demonstrate additionality, are included in the full report at www.renewablefuelsagency.gov.uk/yearone 

a Crediting period is the finite length of time during which the project's claim of low indirect risks is valid, e.g. 5 or 1 years. The crediting period can be 
renewed, but this requires a new assessment of additionality and the baseline. 

Table 4.2: Summary of methodology 



The main barriers to wide-scale adoption are therefore often 
not of economic nature, but typically find their origins in less 
quantifiable areas such as organisational issues, land right 
issues and customary practices. For example, in Indonesia 
it is difficult to get a permit for palm oil on degraded areas 
as many of these are officially still classified as 'forest' by the 
national government. Given the right incentives, the biofuel 
sector may be able to overcome these barriers - thereby 
fulfilling (a part of) their feedstock requirements in ways that 
have a demonstrably low risk of unwanted indirect effects. 

Table 4.2 summarises, for each of the three types of solutions, 
how suppliers can demonstrate compliance and what the 
claims are that they could make. 



Implications for bioenergy policy 

The case studies demonstrate that a significant potential exists 
to increase bioenergy feedstock production economically 
with a low risk of unwanted indirect effects. The main barriers 
faced for this economic sustainable potential revolve around 
matters such as contractual relationships, land rights and 
customary practices. Whilst not insurmountable, these 
barriers are nevertheless sufficient that such opportunities 
appear unlikely to be realised in the absence of targeted 
policy incentives. The RFA will continue to work on this 
promising methodology and intends to include it in the 
RTFO in the future. The RFA will also raise awareness of 
the methodology with other organisations, including biofuel 
sustainability standards, national governments and the 
European Commission. 



64 Renewable Fuels Agency 



Year One of the RTFO 



Development of sustainability 
standards 



Background 

The RTFO Biofuel Sustainability Meta-Standard was 
developed with stakeholders to encourage the supply of 
sustainable feedstocks for biofuel production, and to provide 
a clear and credible benchmark for sustainability reporting in 
the UK. The standard covers key social and environmental 
principles and criteria, such as biodiversity protection and 
land rights. The scheme was designed to enable existing 
feedstock sustainability standards, such as the RSPO, to 
demonstrate compliance with the Meta-Standard, provided 
that they cover sufficient criteria. The RTFO Meta-Standard 
is the world's first operational reporting scheme for biofuels 
implemented by a national government, and was intended as 
a stepping stone to mandatory performance requirements. 

From December 2010, biofuels that count towards either 
the RED or Fuel Quality Directive (FQD) targets will have 
to meet mandatory carbon and sustainability requirements 
defined by the EC. These include a minimum GHG saving 
threshold and the exclusion of feedstocks from land with 
high biodiversity or high carbon stock. The requirements also 
include reporting items on environmental and social issues 



such as impacts on air, soil and water and labour conditions. 
The EC will report in 2010 on the impact of iLUC on GHG 
emissions from biofuels and ways to minimise that impact. 
This could include a proposal to include the impacts of iLUC 
in the GHG methodology for biofuels in the Directive. 

As well as providing assurance against the RTFO 
Meta-Standard, voluntary feedstock sustainability standards 
are also likely to have a role to play in helping suppliers meet 
the RED and FQD requirements. This report assesses the 
current status and prospects of these standards, and the role 
the RTFO has had in encouraging their development. 

The full study is available available at 
www.renewablefuelsagency.gov.uk/yearone. 

Current status of feedstock and biofuel 
sustainability standards 

While very few sustainability standards were in place when 
the RTFO started in 2008, there has been significant activity 
over the last few years to develop standards for tropical 
feedstocks such as palm oil, soy and sugar cane. Several are 





Status 


Sustainability criteria 


Current scope / coverage 


RED 
biodiversity 


RED carbon 
stock 


RTFO 
Environmental 


RTFO Social 


iLUC 


Biofuel 
feedstock(s) 


Countries 


ACCS 


Operational 


Yes 


Partial 


Meta-Standard 


No 


No 


OSR, sugar 
beet, wheat 


UK (ENG, 

Wales) 


BSI 


Due 2010 


Not 
assessed 


Not assessed 


No 


Meta-Standard 


No 


Sugar cane 


AUS, BRA, 
DOM, IND 


FSC 


Operational 


Yes 


No 


Qualifying 
Standard 


No 


No 


Wood, 
wood fibres 


all regions 


Genesis QA 


Operational 


Yes 


Partial 


Meta-Standard 


No 


No 


OSR, sugar 
beet, wheat 


UK 


LEAF 


Operational 


Partial 


No 


Qualifying 
Standard 


No 


No 


OSR, beet, 

wheat 


UK +17 
countries 


RSPO 


Operational 


Yes 


Partial 


Qualifying 
Standard 


Qualifying 
Standard 


No 


Palm 


IDN, MYS 
PNG 


RTRS 


Due June 2010 


Partial 


No 


Qualifying 
Standard 


Meta-Standard 


No 


Soy 


ARG, BRA 
PRY, IND 


SAN/RA 


Operational 


Yes 


Partial 


Qualifying 
Standard 


Qualifying 
Standard 


No 


Palm, soy, 

sugar cane, 

sunflower 


19 countries 



ACCS - Assured Combinable Crops Scheme, BSI - Better Sugar Cane Initiative, FSC - Forest Stewardship Council, 

Genesis QA - Genesis Quality Assurance, LEAF - Linking Environment And Farming, RSPO - Roundtable on Sustainable Palm Oil, 

RTRS - Round Table on Responsible Soy, SAN/RA - Sustainable Agriculture Standard/ Rainforest Alliance 

ARG - Argentina, AUS - Australia, BRA - Brazil, DOM - Dominican Republic, ENG - England, IDN - Indonesia, IND - India, MYS - Malaysia, 
PNG - Papua New Guinea, PRY - Paraguay, UK - United Kingdom 

Table 4.3: Overview of feedstock sustainability standards 



Year One of the RTFO 



Renewable Fuels Agency 65 



expected to become operational during 201 0, but challenges 
remain in ensuring that they both meet the RED requirements 
and provide sufficient certified volume on the market. 

Fewer standards are available for moderate climate 
feedstocks, such as oilseed rape, wheat or sugar beet. 
ACCS, Genesis QA and LEAF in the UK are exceptional in 
this regard within the EU, but even these do not currently 
meet the full RED requirements. 

Table 4.3 gives an overview of the operational status and 
current scope in terms of sustainability criteria covered 
and geographical and feedstock coverage of the current 
Qualifying Standards 1 under the RTFO, including coverage of 
the RED sustainability criteria. 

In general, all of the Qualifying Standards benchmarked under 
the RTFO show good coverage of the RED biodiversity criteria, 
but poor coverage of the RED carbon stock criteria. Indeed, 
very few standards include any explicit GHG considerations 
in their criteria. BSI is a notable exception to this rule and 



RSPO has a working group discussing the issue. In addition, 
none of the standards currently cover iLUC. 

Looking across the standards benchmarked there is generally 
a weaker coverage of social issues, although the (not yet 
operational) RTRS and BSI are exceptions. 

Whilst not assessed in detail, few standards appear to have 
an operational certification scheme for a mass balance chain 
of custody, as required by the RED. Putting in place an 
operational, robust and RED-compliant chain of custody will 
be one of the key challenges for feedstock standards going 
forward. 

In addition to the RTFO Meta-Standard, a number of biofuel 
sustainability initiatives are currently in development. These 
international initiatives tend to cover a broader range of criteria 
and have the potential to have a very large impact. However, 
by their nature many actors are involved which often means 
that their development can take a long time (CEN, ISO and 
GBEP timescales, in particular, are quite vague) and ultimately 
may involve making compromises on criteria. 





Type of 
standard 


Status 


Sustainability criteria 3 


Current scope 


'CO 
CD 
> 

O 

in 


c ^c 
-9 o 

8 % 


cd 
to 

S 

'3 

o 
00 


CO 

o 
o 

CD 


O 
_j 


j^ 

o 
o 
% 

"O 
CD 
CD 

LL 


CO 
=3 

o 
,o 

o 
a. 

CO 

CO 

o 

CD 

o 


RSB 


Certification 
standard 


Pilot testing (due 2010) 


Yes 


Yes 


Yes 


Yes 


No 


All (biofuels) 


Global 


GBEP 


Framework for 
governments 


In development 


Yes 


Yes 


Yes 


Yes 


Yes 


All (bioenergy) 


Global 


RED/ 
FQD 


EU Directive 


Due to be implemented 
in Dec 2010 


Yes 


Yes 


Non- 
mandatory 


Non- 
mandatory 


No 

(report 201 0) 


All (biofuels/ 
bioliquids) 


Global (for EU 
supply) 


CEN 


European norm 


In development 


Yes 


Yes 


No 


No 


No 


All (for energy 
application) 


Global (for EU 
supply) 


ISO 


International norm 


In development 


Unknown 


Unknown 


Unknown 


Unknown 


Unknown 


All (for 
bioenergy) 


Global 



a These biofuel sustainability standards have not yet been benchmarked against the RED or the RTFO. The Sustainability Criteria columns aim to 
provide insight into whether the standards include criteria on specific aspects, rather than to indicate compliance / coverage with RED or the RTFO. 

RSB - Roundtable on Sustainable Biofuels, GBEP - Global Bioenergy Partnership, RED/FQD - Renewable Energy Directive/Fuel Quality Directive, 
CEN - European Committee for Standardization, ISO - International Organization for Standardization 

Table 4.4: Overview of international Biofuel Sustainability Standards 



1 A 'Qualifying Standard' under the RTFO is defined as a standard that 
meets sufficient sustainability criteria to provide a minimum level of assurance 
without meeting the full requirements of the Meta-Standard. 



66 Renewable Fuels Agency 



Year One of the RTFO 



The RFA was pioneering in the development of the 
RTFO Meta-Standard reporting system' 



The influence of the RTFO Meta-Standard on 
the development of sustainability standards 

The RTFO Meta-Standard approach was intended to create 
market demand for sustainaPility certification schemes. When 
Penchmarking standards the RFA aims to Pe transparent 
and to engage with the standard owners, providing 
recommendations on how to improve the standards. 

The RFA has had some success to-date in encouraging 
standards to adapt to Pe closer to the RTFO or RED/FQD 
requirements: 

• ACCS, when first Penchmarked in 2007, did not meet the 
Qualifying Standard level. A numPer of meetings were held 
with ACCS to explain the potential opportunities provided 
by the forthcoming RTFO, and to make recommendations. 
ACCS and its sister standard, Genesis QA, now both meet 
the full RTFO Environmental Sustainability Meta-Standard. 
6.7 million litres of fuel from ACCS certified feedstock was 
reported in 2008/09. 

• An RFA benchmark of BSI's first draft standard for sugar 
cane showed that the standard would not meet the level for 
an Environmental Qualifying Standard. The RFA continues 
to engage with BSI and hopes that the final version will 
become an Environmental Qualifying Standard. 

• An RFA benchmark of the RTRS first draft principles and 
criteria demonstrated that it met the Environmental and 
Social Qualifying Standard but not the full Meta-Standard. 
Following recommendations to the standard owners, the 
latest 'Field Testing Version' includes further criteria that 
may now meet the full RTFO Social Meta-Standard level. 

The RFA was pioneering in the development of the RTFO 
Meta-Standard reporting system. It was published at a time 
when increasing worldwide attention was turning towards the 
sustainability of biofuels, and as the first operational scheme 
of its kind has demonstrated what can be achieved. As such 
the Meta-Standard has been influential in the development 
of other standards around the world, in ways beyond direct 
engagement with the RFA. The RTFO appears to have served 
as a model for (parts of) several other schemes, for example, 
the RED, RSB and in the SAN/RA energy crops addendum, 
which is very much in line with the RTFO principles and 
criteria. 



The RFA intends to continue to work with standards owners 
in the future to promote the most sustainable biofuels. The 
RFA has written to all benchmarked standard owners with 
the results of a benchmarking exercise of their standard 
against the current RED/FQD criteria, with, where necessary, 
recommendations on how the standard could adapt to meet 
the new requirements 2 . 

Future outlook 

A number of the feedstock standards owners have indicated 
that they are making an active effort to comply with the RED 
criteria. These include RTRS, BSI and potentially LEAF (who 
will be consulting on revisions shortly). Market demand is 
likely to be key in determining how other schemes respond, 
including ACCS who review their standard on an ongoing 
basis. 

All of the sustainability standards being developed specifically 
for biofuel appear likely to aim for RED compliance. 

As the standards develop over the coming years it is likely 
that we may see two broad approaches: those standards 
that focus on (the minimum level of) RED compliance, and 
those that focus on a higher level of sustainability on a 
voluntary basis, such as the feedstock round tables, RSB, 
and potentially the RTFO Meta-Standard. 



2 The RFA assessment is provisional since not all of the RED requirements 
are yet fully defined. The Commission are developing their own assessment 
procedures to ensure a consistent approach across the EU. 



Year One of the RTFO 



Renewable Fuels Agency 67 



Section 5 

Concluding remarks 




68 Renewable Fuels Agency 



Year One of the RTFO 



Concluding remarks 




\ 

verified by third parties, 
supplying biofuels. 



the 



Year One 

This first RFA report to 
Parliament on the RTFO 
provides clear evidence that, 
sourcing biofuels responsibly 
is not only theoretically, 
but both practically and 
economically achievable. 

Our report has, in great detail, 
reviewed the operation of 
the RTFO, of ourselves as 
regulators and, using data 
performance of companies 



The RTFO has broadly met the Government's intentions and 
expectations, and carbon and sustainability reporting has, as 
a stepping stone to mandatory sustainability, been a driver of 
action by suppliers. 

The greenhouse gas (GHG) savings achieved have been in line 
with the predictions of the Regulatory Impact Assessment, 
although we are clear that, for now, indirect effects are not 
accounted for, nor has all previous land-use been identified. 

We are concerned that the proportion of fuel reported 
meeting an environmental standard is only 20%. It is clear 
that not only are certified sustainable biofuels available, 
but the opportunity to develop compliance with our Meta- 
Standard provides a route to reporting sustainability where 
satisfactory standards do not exist. 

Encouragingly, although the verification process has 
resulted in some changes to data, the provisional figures we 
published in July 2009 have been largely confirmed. As was 
perhaps inevitable for the first year of a system that requires a 
fundamental overhaul of the way that UK fuel suppliers think 
about biofuels and operate chain of custody systems, there 
has been a need for some companies to revise claims on 
sustainability. 

Such changes and the challenges made to some claims 
have demonstrated that the checks and balances in the 
RTFO system are working well. Active engagement and 
consultation between the RFA and fuel suppliers has enabled 
us to make sure that unverifiable data has very much been 
the exception and not the rule. 



Year Two 

The RTFO data presented in this report reflects biofuel 
supplied to the UK market at least nine months before 
publication. It is perhaps useful to make some observations 
on apparent performance since then. 

At the time of writing, we are already half way through the 
2009/1 reporting year, and are beginning to have an idea of 
what to expect in the second year's results. Several obligated 
suppliers have started the second year well, meeting all three 
of the increased targets. 

Although we are seeing progress on the sourcing of biofuel 
meeting sustainability standards, it seems likely that most 
suppliers will again fall short of the Government's target for 
2009/10. 

It is my expectation that suppliers with experience of RTFO 
year one should find the next verification process both less 
burdensome and less likely to require revisions to data. 
Perhaps more importantly, when sustainability criteria 
become mandatory the groundwork laid and experience 
gained in these first years of non-mandatory reporting will 
allow UK business to make a smooth transition. 

The lack of available standards for many feedstocks remains 
a barrier restricting the capacity of companies to source 
certified fuels. However, in cases where certification is active 
and a surplus of certified feedstock is available, suppliers in 
the UK could support the market for sustainable crops by 
paying the premium necessary to purchase this certified 
feedstock. For palm, at reported certificate prices (as in 
November 2009) this premium could be less than one penny 
for every litre of biofuel, and the market surplus could easily 
meet the whole of UK palm for biodiesel demand in 2009/1 
- raising sustainability performance for the obligation as a 
whole by ten percent. 

Overall performance could also be raised by independent 
sustainability auditing. At least one company is committed 
to implementing RTFO Meta-Standard auditing for German 
oilseed rape. If applied by all suppliers using this source of 
feedstock, audits could raise overall performance by over ten 
percent. 

Towards the RED 

The Renewable Energy Directive introduces a step change 
in the regulation of biofuel sustainability in the EU - the 
prohibition on sourcing biofuel from high carbon and high 
biodiversity areas will provide valuable assurance that the EU 



Year One of the RTFO 



Renewable Fuels Agency 69 



is not directly driving carbon emissions or loss of the most 
valuable habitats. 

The mandatory criteria are not the end of the story, and 
reporting at company state and Commission level on other 
sustainability impacts of biofuels will be crucial. It is our belief 
that the best way to manage the impacts of biofuel production 
on soil, air and water quality is through robust environmental 
sustainability assurance designed for specific feedstocks, 
namely assurance schemes and independent audit criteria 
such as we have previously benchmarked against the RTFO 
Meta-Standard. 

Social criteria under these schemes can also help make 
biofuels cultivation truly benefit the communities in which 
it occurs, ensure land rights are respected and protect the 
rights of agricultural workers. Such criteria can also ensure 
that free, prior and informed consent of local communities is 
a necessary pre-condition of biofuels expansion. 

Indirect effects 

Eighteen months ago, the Gallagher Review made it clear that 
dealing with indirect effects was a necessary pre-condition 
of a successful long term approach to biofuels policy. Since 
then, our work (and that of others in the field) has led to iLUC 
and food price being written into the Renewable Energy 
Directive as areas where the impacts of biofuels must be 
assessed. 

It is worth reminding ourselves that the Gallagher Review 
concluded that sustainable biofuels are possible, and pointed 
to the potential for using idle land and optimising the use of 
appropriate wastes and by-products. Within this report, we 
have presented five cases in which actively addressing iLUC 
at the plantation level is shown to be possible. 

Of course, our illustrations are not an exhaustive list. Rather 
the examples and methodology we have set out point 
towards a wider range of analogous cases where integrated 
land management, a focus on currently unproductive land 
and the best use of 'wastes' will allow iLUC to be avoided 
and impacts on food prices to be minimised. 

The European Commission will report by the end of 2010 
on iLUC, and has already pre-consulted on possible options 
for dealing with it. The UK Government responded favouring 
a combination of an iLUC factor and bonuses where iLUC 
can be avoided. Our research demonstrates how this could 
be implemented, providing a set of cases where a possible 
future iLUC factor could be waived, and bonuses offered. 



Our emerging role 

We have ongoing programmes of both research and direct 
engagement, pushing the boundaries of the science of biofuel 
sustainability and sharing the benefits of our experience. 

We are committed to working not only with other EU 
member states as mandatory sustainability under the RED 
approaches, but also to engaging with emerging biofuel 
regulators beyond the EU. This active global involvement will 
not only serve to enhance biofuel sustainability reporting in 
other countries, but provide us with invaluable opportunities 
to take advantage in the UK of the benefits of the lessons 
learnt by colleagues in other countries. 

The RFA is also looking to continue to develop meaningful 
relationships with producers and processors wherever they 
are, and to increase the understanding of the biofuels the UK 
will need to achieve its targets sustainably. 

In conclusion 

Truly sustainable biofuels are possible. However, this needs 
ongoing commitment from those suppliers that performed well 
in 2008/09 and a step change in the approach of companies 
that are yet to reach this level. The RFA is continuing to 
work to support and strengthen sustainability schemes that 
can provide assurance of sustainable production. Indirect 
effects from biofuels can be managed, but will require 
governments to make this happen. Our post-Gallagher iLUC 
work in particular has mapped out one route. The study on 
the indirect effects of wastes suggests a methodology to 
determine which wastes and residues should be counted 
twice. 

We remain committed to sharing our world-first experience 
in operating a sustainability reporting scheme for biofuels, 
to studying emerging issues and to continue to work 
collaboratively with our stakeholders to ensure that our use 
of biofuels is sustainable. 




Chief Executive 
4 January 2010 



70 Renewable Fuels Agency 



Year One of the RTFO 




Year One of the RTFO 



Renewable Fuels Agency 71 



Renewable Fuels Agency 

Ashdown House 
Sedlescombe Road North 
St Leonards-on-Sea 
East Sussex TN37 7GA 
UK 

T 020 7944 8555 

E contact@rfa.gsi.gov.uk 

www.renewablefuelsagency.gov.uk 



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